Elon Musk’s plan to cut federal spending by US$1 trillion is raising concerns among tech investors. The proposed cuts could hit companies that rely on government contracts, as the federal government is expected to spend around US$40 billion on software and cloud services in 2025.

Big players like Microsoft, Oracle, SAP, and Accenture may face revenue pressure.

CACI International and Science Applications International Corp., which depend heavily on government contracts, have seen stock drops of over 20% since the last election.

Accenture, which gets about 8% of its revenue from US government contracts, has pointed to the Department of Government Efficiency (DOGE) as a factor in its recent slowdown. Gartner, with US$1.2 billion in government-linked contracts, is also under watch.

IBM is seen as more resilient due to its AI investments, while ServiceNow, with 11% of sales from the public sector, is considered more at risk.

Earnings growth forecasts for software and services firms in 2025 have been lowered to 11.6% from 12.3%. Despite Musk denying plans to step back from DOGE, investor caution remains high.