Israel-Palestine War’s Impact on Israel’s Tech Sector

On October 9, the investors and analysts said, the tech companies running in Israel are expected to reinforce security as they could face disruptions. The tech sector is on alert after Hamas gunmen from Gaza killed hundreds of Israelis and abducted an unknown number of people.

Stock and bond prices of Israeli companies plunged and many organizations were closed on Sunday as the Palestinian group Hamas rampaged through the towns of Israel on Saturday. In addition, militants also fired thousands of rockets in a surprise attack in Israel some of which reached Tel Aviv and led to airlines suspending their flights.

Jack Ablin, chief investment officer and founding partner at Cresset Wealth Advisors said, “It is a huge disruption to business as usual.” He also added that in a short while, resources can be redirected if the conflict expands, such as employees at tech companies being called up as military reservists.

Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina, said there will likely be a “tremendous effort” to safeguard physical installations for companies based in Israel from attacks because some technology spending is tied to the military.

Nvidia, the world’s largest manufacturer of chips used in AI and computer graphics said, it had canceled an AI summit scheduled for Tel Aviv next week, where its CEO Jensen Huang was due to speak.

A spokesperson from Intel Corp. said on Sunday that the company was “closely monitoring the situation in Israel and taking steps to safeguard and support our workers.” However, he refused to say if the chip production was affected by the conflict.

Other tech giants like Microsoft, Amazon, Google, Meta, and Apple gave no response when requested for their thoughts.

There are 500 MNCs operating in Israel most of them are research and development centres after acquiring Israeli start-ups. These MNCs include Intel, IBM, Apple, Microsoft, Google, and Facebook. Especially with the coming AI regulations, the RnD needed to bolster up.

Prime Minister Benjamin Netanyahu in June said Intel was planning to invest $25 billion in a new factory in the southern city of Kiryat Gat. In his words, it is the largest-ever international investment in the country that can employ thousands of people and would add to its chip plants and design centers there.

Quincy Krosby said, “In the longer term, 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.” “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.”

He further added, “It could bolster support for more financial resources for tech for the military, which then ultimately transitions to the private sector tech companies.”

The tech sector in the past has shown perseverance in overcoming a number of conflicts with Hamas in Gaza. Apjit Walia the Managing Director at DVN Capital said, “The Israeli tech sector has historically bounced back from geopolitical tragedies.” If the conflict prolongs, that may not be the case this time.