The strong U.S. dollar is a drag against technology brands in an environment already battered by fierce macro headwinds, ServiceNow CEO Bill McDermott told CNBC’s Jim Cramer.
“You’re at 41-year high inflation. The dollar is now the highest in over two decades. We have rising interest rates. People are worried about security. You have a war in Europe. So, the mood isn’t great, ”McDermott said in an interview aired on“ Mad Money ”after the closing bell on Monday.
“You can see the headwind of the dollar today against well -known technology brands,” the CEO added. “Nothing more than running out of money now.”
Shares of ServiceNow, which helps companies and organizations digitize their workflows, fell 13% on Tuesday after McDermott’s comments, meant as a general industry observation, were no longer news specifically on ServiceNow since the company was in quiet period before reporting its latest quarterly earnings on July 27th.
Tech stocks are embroiled in a stock market battling geopolitical turmoil, high inflation, rising Federal Reserve interest rates and Covid -driven closures in China. Many tech giants are expected to report their quarterly earnings in the next month or so, setting the tone for the rest of the industry.
However, McDermott remained adamant that tech companies were the key to helping the U.S. economy at the time and push through this turbulent environment.
“When you think about energy, and the dislocation caused by the war in Europe, and this reprioritization that I say, you see a longer cycle. [to close deals] in Europe. We saw that, “McDermott said.” But it doesn’t fundamentally change the narrative that technology is the only way to break crosswinds. “
The reprioritization he refers to is the increasing demand for rapid return-on-investment-another symptom of being cautious in the current environment.
“There’s a new level or prioritization in the enterprise. And I’ve seen this, actually since we last met, Jim, hitting a new gear. Where companies are first saying ‘which platforms do we want to bet on,'” and then try to adjust their priorities, McDermott says.
“There’s a filter to all of this now. And that’s quick return on investment. And if you can’t put an architecture in there that gives the customer a quick ROI, most likely, you’ll be put off,” he added.
Stifel said in a note Tuesday that it believes the company is “likely” to lower their expectations when it reports earnings, citing McDermott’s comments on the reprioritization. The investment bank also expects other companies across the industry to follow in the coming weeks.
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