Strong shekel squeezes Israeli high-tech as AI reshapes the industry – opinion

The strong shekel, which reached its lowest exchange rate against the dollar since 1993 at NIS 2.8 in June, is significantly impacting Israel's high-tech sector. While a strong shekel benefits consumers, it reduces the shekel-denominated revenue for tech companies that primarily earn in dollars and pay expenses in shekels. This has led to a nearly 20% cut in effective income for some companies, even without customer loss or investor withdrawal. For example, Wix announced layoffs, stating, "A very significant share of expenses is denominated in shekels, while the vast majority of revenues are denominated in dollars." This issue is compounded by the rise of AI, which is reshaping the industry and increasing the cost of Israeli engineers relative to those in Silicon Valley.

• The Israeli government has approved a NIS 1.6 billion assistance package, with NIS 1 billion for start-ups, to extend their runway by approximately six months and prevent promising young companies from failing due to the temporary shock.
• The long-term outlook suggests Israel will need to adjust to a stronger shekel, though recent security tensions have seen the dollar recover slightly above NIS 3.