Growing Through Recessions
While the prospect of weakening economic conditions may raise concerns, investors should also consider the historical resilience of emerging technologies during recessionary periods.
Investors are increasingly uneasy about a potential recession driven by uncertainties surrounding global trade policies. While the prospect of weakening economic conditions may raise concerns, investors should also consider the historical resilience of emerging technologies during recessionary periods.
- We believe growth stocks are the beneficiaries of technological change, as these companies often enable the innovations that reshape how we live and work. The charts above illustrate how technological innovation has proven resilient during recessionary periods, often emerging stronger and more pervasive in the recovery periods that follow.
- Personal Computer (PC) and the Early 1990s Recession: Despite the economic slowdown of the early 1990s, PCs continued to rapidly penetrate households and businesses and grew faster than the broader economy during the subsequent recovery. Declining hardware costs combined with clear productivity advantages drove PCs to transition from niche business tools to household essentials.
- Smartphone Adoption During the Global Financial Crisis (GFC): While the GFC was one of the worst recessions in modern history, global smartphone subscriptions surged during the period and further accelerated beyond overall economic growth in the recovery phase. This growth was catalyzed by the groundbreaking launch of the iPhone in 2007—its innovative design not only spurred widespread adoption but also created entirely new industries such as ride-sharing and social media.
- E-commerce and Internet Ad Revenue During the GFC: U.S. e-commerce and internet advertising revenues exhibited remarkable resilience throughout the GFC and accelerated during the subsequent recovery, outperforming total U.S. retail sales. Consumers increasingly sought online convenience and competitive pricing, prompting businesses to allocate marketing budgets toward digital platforms for targeted, measurable, and cost-effective advertising.
- Software Spending Through the COVID-19 Recession: Despite a sharp decline in overall economic activity during the COVID-19 pandemic, businesses accelerated digital transformation efforts, significantly increasing software spending. Investments in cloud infrastructure surged as companies sought to maintain productivity and collaboration amid the shift toward remote work. As a result, software spending not only grew during the recession but also accelerated at a pace that exceeded the broader economic recovery.
- We believe these historical examples reveal a recurring theme: many emerging technologies have not only shown resilience during recessions but also have typically accelerated at a faster rate than the broader economy in the following recovery years. As investors evaluate today’s emerging technologies—such as artificial intelligence, autonomous vehicles, robotics, and cell-based therapeutics—history serves as a powerful reminder of the long-term compounding benefits that come from embracing technological advancement, particularly in challenging economic environments.
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of April 2025. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments.
Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.
Companies involved in, or exposed to, AI-related businesses may have limited product lines, markets, financial resources or personnel as they face intense competition and potentially rapid product obsolescence, and many depend significantly on retaining and growing their consumer base. These companies may be substantially exposed to the market and business risks of other industries or sectors, and may be adversely affected by negative developments impacting those companies, industries or sectors, as well as by loss or impairment of intellectual property rights or misappropriation of their technology. Companies that utilize AI could face reputational harm, competitive harm, and legal liability, and/or an adverse effect on business operations as content, analyses, or recommendations that AI applications produce may be deficient, inaccurate, biased, misleading or incomplete, may lead to errors, and may be used in negligent or criminal ways. AI companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology.
Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue. Companies exploring new technologies may face regulatory, political or legal challenges that may adversely impact their competitive positioning and financial prospects. Developing technologies to displace older technologies or create new markets may not in fact do so, and there may be sector-specific risks. There will be winners and losers that emerge, and investors need to conduct a significant amount of due diligence on individual companies to assess these risks and opportunities.
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