Israel’s tech sector could face disruptions after attacks, investors say. After Hamas terrorists from Gaza massacred hundreds of Israelis and kidnapped an undetermined number more, investors and analysts predicted that tech businesses operating in Israel would bolster security because they would experience difficulties.

With 14% of jobs and about a fifth of the country’s gross domestic product, high-tech sectors have been Israel’s fastest-growing sector for a few decades and a key driver of economic growth.

After Palestinian terrorists from the Hamas organization ransacked Israeli communities on Saturday and launched hundreds of missiles into Israel in an unexpected onslaught, Israeli stock and bond prices fell, and many businesses were shuttered on Sunday.

Airlines had to halt flights to and from Israel after some missiles were launched as far away as Tel Aviv. Hundreds of civilians have been killed due to Israel’s airstrikes on Hamas sites in Gaza in retaliation. Jack Ablin, chief investment officer and founding partner of Cresset Wealth Advisors, said, “it is a significant disruption to business as usual.” If the crisis worsens, he added, resources can be redirected temporarily. For instance, workers at IT businesses might be called up for military reserve duty.

Because some technology expenditure is linked to the military, Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina, predicted that a “tremendous effort” will be made to protect physical premises for firms with offices in Israel against assaults.

The top employer and exporter in Israel, chipmaker Intel Corp (INTC.O), said on Sunday that it was “closely monitoring the situation in Israel and taking steps to safeguard and support our workers.” If the crisis has impacted chip manufacturing, the representative would not comment.

The leading producer of processors for computer graphics and artificial intelligence, Nvidia (NVDA.O), said that its CEO, Jensen Huang, will not be speaking at an AI symposium set for Tel Aviv next week.

Tower Semiconductor (TSEM.TA), an Israeli company that sells analog and mixed-signal semiconductors primarily to the consumer and automotive industries, said that business was normal.

Other IT behemoths, including Apple (AAPL.O), Meta Platforms (META.O), and Alphabet (GOOGL.O), did not reply to requests for comment. Microsoft declined to comment (MSFT.O).

In 2023, domestic political unrest and protests had already caused a downturn in Israel’s technological industry. Israeli IT businesses have started incorporating more frequently in the US.

Military and AI spending increased.
Intel established a foothold in Israel in 1974, but the start-up culture began in the 1990s. Since then, Israel has become the second-largest tech hub outside of Silicon Valley, with hundreds of firms and a major ecosystem.

After purchasing Israeli start-ups, 500 international corporations, including Intel, IBM, Apple, Microsoft, Google, and Facebook, now function in Israel, mostly as research and development facilities.

Prime Minister Benjamin Netanyahu said in June that Intel intended to invest $25 billion in a new facility in Kiryat Gat, a southern city located around 42 kilometers (26 miles) from Gaza. He referred to the 2027 opening as the greatest international investment the nation has ever seen, adding to its chip manufacturing and design centers there while potentially creating thousands of jobs.

Due to their tight ties to military expenditure, tech, and AI, two sectors where Israel has been a pioneer, may see additional investment in the long run, according to LPL’s Krosby.

“They will probably increase the investment in AI,” Krosby stated. “When a country is caught literally off guard the first thing they look at – beside 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,” said Krosby. In the past, the IT industry has proven its tenacity by resolving several confrontations with Hamas in Gaza.

The managing director of DVN Capital, Apjit Walia, stated that the Israeli IT industry “has historically recovered from geopolitical tragedies.”