Most of the biggest tech names managed to reclaim some of their gains on Friday, buoyed by Apple’s relatively healthy performance. But the general mood remained gloomy.
A few hundred different data points have been shared with the market. Taken together, they tell the story of industries hit by a rising dollar, supply chains stretching into year three, inflation yet to be brought under control, and economic growth numbers that look increasingly bleak. We’ve distilled all of this into 10 charts – be sure to tell us what we missed.
The malaise in the semiconductor industry can best be summed up by the unfolding disaster at Intel, the largest chip maker in the United States. As a supplier of computer and server components, Intel has been hit hard by the slowdown and is trying hard to get it right even as it vows to catch up with its rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost cuts won’t come in time to help the fourth-quarter numbers.
A year ago, the world was running low on chips and suppliers were rushing to buy equipment and ramp up production. Last month, they collectively slashed 2022 budgets by more than $16 billion and are preparing to cut spending next year.
A recurring theme in earnings this season has been the impact of a stronger US dollar against almost every peer. Few companies are immune, with Amazon.com being one of the hardest hit.
Apple Inc. Relatively strong compared to the rest. Its iPhone has performed well, though with a touch lower ratings and a boost with a few more days of availability. Services, the division that includes Apple Music and Apple + TV that is the company’s second-largest shareholder, continued to post solid growth, albeit at a slower rate than previous quarters.
Meta Platforms Inc. is being hit. From all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes to Apple’s privacy rules, making it harder to track users through apps and thus lowering advertising rates. Global deflation, including high inflation, only adds to the problems. Although user numbers are slowly increasing — it has 3.7 billion monthly active users across its suite of apps — average revenue per capita is declining.
Meanwhile, the social media company is burning money on its Reality Labs division — founder Mark Zuckerberg’s venture into virtual reality and metaverse that inspired the name change last year. The business has lost more than $20 billion so far, and Zuckerberg told investors to expect the shortage to continue for a while.
Alphabet Inc isn’t doing well, but at least it’s growing. The 6.1% increase in third-quarter revenue was the slowest since June 2020 after the Covid-19 pandemic spread. Google’s search-based advertising divisions outperform its network affiliates and YouTube video service, while cloud services remain strong.
At Microsoft Corp. , the decade-long transition away from client computing — where revenue is tied directly to PC and server sales — is helping the company weather the storm better than most. Revenue in the September period was up just 11%, the slowest in five years, but that’s much better than most tech peers. Cloud offerings and throughput are the main reasons for this relative strength. Customers – whether consumers or businesses – are somewhat tied to its suite of Office products, while those who have signed up for Azure cloud services are not in a position to escape when times get tough.
Two recent charts show how poorly investors have responded to all this news. The stock market slump is a global cross-industry phenomenon. However, the tech sector fared much worse, with the Nasdaq down 30% from a year ago.
Most suffer are those companies that rely heavily on advertising or short-term consumer purchases. Money appears to be turning into what could be considered more defensive tech stocks, and Netflix Inc is among them.
If it’s any consolation, it’s that investors no longer have to worry about Twitter Inc.’s fortunes. This is Elon Musk’s problem now.
More other writers at Bloomberg Opinion:
• The Chip Code Won’t Work Without Every Part of the Chip: Thomas Black
Money-losing Airbnb hosts have three options: Teresa Gilarducci
Tech investors are overreacting as if they’re yelling at the cloud: Tim Colban
This column does not necessarily reflect the opinion of the editorial staff or Bloomberg LP and its owners.
Tim Colban is a columnist for Bloomberg Opinion covering technology in Asia. Previously, he was a technical reporter for Bloomberg News.
More stories like this are available at bloomberg.com/opinion