Tech investors and analysts say Israel’s technology sector could face setbacks following Sunday’s attack from militants from Palestine group, Hamas, which left hundreds dead, and saw Israel’s stock and bond prices deflating.
High-tech industries have, in recent decades, been the fastest growing sector in Israel. These companies have been crucial for economic growth, accounting for 14% of jobs and almost a fifth of gross domestic product. The Hamas attack has, however, disrupted this growth.
“It is a huge disruption to business as usual,” chief investment officer and founding partner at US company, Cresset Wealth Advisors, Jack Ablin, said. He added that staff of Israeli tech companies could even end up being drafted to fight, which could worsen the situation.
Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina, believed there will likely be a tremendous effort to guard physical installations for companies based in Israel from attacks because some technology spending is tied to the military.
Intel Corp currently holds the position of Israel’s largest private employer and exporter. A spokesperson for the chip company revealed on Sunday the company was “closely monitoring the situation in Israel and taking steps to safeguard and support our workers.” The spokesperson declined to say whether chip production has been affected by the situation.
Nvidia, which has the largest market for AI chips and computer graphics, also revealed it had cancelled an AI summit scheduled for Tel Aviv next week, where its CEO, Jensen Huang, was due to speak.
Despite the conflict with Hamas, some Israel technology companies are still operating without fail. Israel’s Tower Semiconductor, which provides customers with analog and mixed-signal semiconductors, mainly for the automotive and consumer industries, said it was operating as usual.
The tech sector has shown resilience in the past, overcoming a number of conflicts with Hamas in Gaza, however it had been facing a dive in 2023, worsened by internal political conflict and protests.
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The tech and AI sector, where Israel has been a leader, could see increased investment because of the industries’ close tie-in with military spending, Quincy Krosby said, adding that “they will probably increase the investment in AI. When a country is caught literally off guard the first thing they look at, besides the obvious problems with intelligence, is what was missed within the security systems.”
“It could bolster support for more financial resources for tech for the military, which then ultimately transitions to the private sector tech companies,” Krosby added.
Managing Director at DVN Capital, Apjit Walia, also commented that the Israeli tech sector “has historically bounced back from geopolitical tragedies.”
Israel’s tech sector has been growing since Intel established a presence in 1974. The country’s start-up scene took off in the 1990s, earning a reputation as the world’s second-largest tech centre outside of Silicon Valley, with thousands of companies and developing a significant ecosystem.
Currently, 500 multinationals operate in Israel, from Intel to IBM, Apple, Microsoft, Google and Facebook. They mainly operate as research and development centres after buying Israeli start-ups.
In June, Israel’s Prime Minister, Benjamin Netanyahu, said Intel was planning to spend $25 billion on a new factory in the southern city of Kiryat Gat some 42 km (26 miles) from the Palestine city, Gaza.
The factory is due to open in 2027, and has been noted as the largest-ever international investment in the country that could employ thousands of people and would add to its chip plants and design centres there.