Most of the major tech names managed to regain their ground on Friday, helped by Apple’s relatively healthy performance. But the overall mood remained gloomy.
A few hundred different data points were shared with the market. Combined, they tell of sectors hit hard, supply chain turmoil now in its third year, inflation still under control and economic growth figures looking increasingly bleak. We’ve broken it all down into 10 charts – be sure to tell us what we’ve missed.
The malaise in the semiconductor industry is best described by the disaster at Intel Corp., the largest U.S. chipmaker. Intel, a supplier of computer and server components, was hit hard by the recession and is scrambling to adjust, even vowing to catch up with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But cost cuts will not come. in time to help the fourth quarter numbers.
A year ago, there was a global shortage of chips, and suppliers rushed to buy equipment and increase output. Last month, they collectively cut the 2022 budget by more than $16 billion and are preparing to cut spending next year.
A recurring theme on the earnings side this season has been the impact of the rising US dollar against almost all peers. Few companies are immune, and Amazon.com Inc. is one of the hardest hit.
Apple Inc. looks relatively strong compared to everyone else. Its iPhone performed quite well, albeit slightly below estimates, boosted by availability for a few more days. The services division, which includes Apple Music and Apple+ TV, the company’s second-biggest revenue generator, continued to show solid growth, albeit at a slower pace than in previous quarters.
Meta Platforms Inc. being hit from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes to Apple’s privacy rules, which make it harder to track users across apps and thus lower ad rates. The global recession, including higher inflation, only adds to the problems. Although the number of users is gradually increasing – there are 3.7 billion monthly active users across its family of apps – the average revenue per person is decreasing.
Meanwhile, the social media company is burning cash for its Reality Labs division, founder Mark Zuckerberg’s venture into virtual reality and the metaverse that inspired last year’s name change. The business has lost more than $20 billion so far, and Zuckerberg told investors to expect the shortfall to continue for some time.
Alphabet Inc. not doing so well, but at least it’s growing. Third-quarter revenue growth of 6.1% was the slowest since June 2020 following the Covid-19 pandemic. Its Google search advertising divisions are outpacing the network’s affiliates and video service YouTube, while its cloud services remain strong.
Microsoft Corp. a decade-long shift away from client computing, where revenue is tied directly to PC and server hardware sales, is helping it weather the storm better than most. Revenues rose just 11% in the September period, the slowest in five years, but far better than most tech peers. Its cloud and productivity offerings are the main reasons for this relative strength. Customers — both consumer and enterprise — are somewhat used to its Office suite, while those who have signed up for its Azure cloud services can’t run away when the going gets tough.
The last two charts show how poorly investors have reacted to all this news. The stock market downturn is a global, cross-sector phenomenon. However, the technology sector has fared much worse, with the Nasdaq index down 30% from a year ago.
Businesses that rely heavily on advertising or short-term consumer purchases suffer the most. Money appears to be flowing into what might be considered more defensive tech stocks, with Netflix Inc. shining brightest among them.
If there’s any consolation, it’s that investors no longer have to worry about Twitter Inc. wealth. This is Elon Musk’s problem now.
More from other writers at Bloomberg Opinion:
• The Chips Act won’t work without every part of the chip: Thomas Black
• Money-losing Airbnb hosts have three options: Teresa Ghilarducci
• Tech Investors Overreact, Like Yelling at the Cloud: Tim Culpan
This column does not necessarily reflect the views of the editorial board or of Bloomberg LP and its owners.
Tim Kulpan is a reporter for Bloomberg Opinion covering technology in Asia. He was previously a technology reporter for Bloomberg News.
More stories like this are available at bloomberg.com/opinion