Systemic Risk in the Tech Sector under Uncertainty : - Firm Level Evidence

Sammanfattning

The rapid expansion of the technology (tech) sector, particularly driven by Artificial intelligence (AI), has been accompanied by rising geopolitical tensions and growing concerns about systemic risk. Reliance on global supply chains, sensitivity to regu- latory shocks, and valuation dynamics tied to innovation make tech firms especially prone to synchronized risk. This study investigates systemic risk in a panel of 131 tech firms across 9 sub-sectors and 15 countries over the period 2012–2026. We combine daily return data with firm-level balance sheet information to examine both intercon- nectedness and the drivers of systemic risk. We employ a DCC-GJR-GARCH model to estimate time-varying volatility and correlations, from which we derive Conditional Value-at-Risk (CoVaR) and Marginal Expected Shortfall (MES). We further analyze the effect of geopolitical uncertainty on tech sector systemic risk, incorporating both market-wide uncertainty measures and firm-specific characteristics. Our findings show that systemic risk in the tech sector is highly concentrated. Semiconductor and Tech- nology Hardware firms emerge as key contributors to systemic risk, playing a central role in shock propagation, while also being highly exposed to system-wide distress. Tech sector systemic risk is influenced by geopolitical risk and broader market uncer- tainty. Our results highlight the importance of uncertainty and firm characteristics in understanding systemic vulnerability within the global tech sector.