Whether you love it or loathe Elon Musk’s Department of Government Efficiency (DOGE), it has become impossible to ignore since it was set up in January. Its stream of social media updates and claims of cost savings have sparked both admiration and outrage across government, business, and the public. For some, these are long-overdue reforms; for others, they are reckless populism.
But the reality is: DOGE is here, and it is an agent of change that investors need to be aware of. Particularly technology investors. In just a few months, it has shattered the status quo in Washington and IT government contracts, many untouched for decades, are now under scrutiny.
The US government is not just a major spender. It is the spender, accounting for nearly 20% of IT spending across federal, state, and local levels. Tech spending is heavily concentrated in areas like consulting (US$30 billion), infrastructure services, and application management. These are precisely the categories being disrupted, resulting in a sharp slowdown in procurement.
This standstill is already rippling through the private sector. Last week, Accenture’s share price fell 8% after revealing that federal agencies were reviewing contracts with the 10 highest-paid consulting firms, including its Federal Services division. Procurement officials are erring on the side of caution, and the result is paralysis. Last month, UiPath, a leader in automation software, issued a profit warning tied to federal spending delays, causing its share price to drop 20% in a single day.
What does it mean for investors?
For now, the focus is on efficiency and cost-cutting, but the longer-term implications could be transformative. Historically, governments have been the slowest adopters of new technology.
While businesses, especially small enterprise, move quickly to embrace trends like generative AI and cloud computing, agencies remain stuck with outdated systems. A large share of the Department of Homeland Security’s computing needs, for example, still runs on mainframes. This is technology that was first introduced in the 1960s, is expensive to maintain, inflexible, and ill-suited to the demands of modern data processing, yet they remain embedded in critical operations.
So DOGE is forcing modernisation, but this will come at a cost. Legacy IT providers and consulting firms with bloated maintenance contracts or outdated software models are already feeling the heat. Categories like ‘seat-based software,’ where costs are tied to the number of users rather than outcomes, look vulnerable. The likely winners will be companies that enable genuine efficiency such as cloud services, cybersecurity tools, and AI-driven solutions as agencies lean into tools that deliver more for less.
DOGE inspiration spreads
The implications stretch beyond the US. Governments in Europe, Asia, and elsewhere are watching closely. With debt levels climbing and the need for defence spending rising, many face pressure to do more with less. DOGE’s radical approach, cutting waste, exposing fraud, and renegotiating contracts, could become a global template. Even if it falters, it is likely to spark similar discussions worldwide.
For markets, this is where the opportunity lies. The uncertainty surrounding DOGE has triggered sharp pullbacks in tech stocks, but these may prove to be short-term overreactions.
Not all tech is created equal. Companies tied to outdated systems will struggle, but those driving modernisation through cloud computing, AI, or automation are well positioned to thrive. Investors need to be able to separate the winners from losers, backing companies delivering transformative solutions, and avoiding those clinging to the past.
As for DOGE, whether its actions amount to temporary populist bravado or mark the beginning of a whole new way of running government is a question for future history books.
All data Bloomberg unless otherwise stated.
With contributions from Sumant Wahi, a technology Portfolio Manager at Man Group.
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