Most of the biggest tech names managed to regain some ground on Friday, buoyed by Apple’s relatively healthy performance. But the overall mood remained gloomy.
Hundreds of different data points are shared with the market. Combined, they tell a story of industries. We’ve distilled it all down to 10 charts – tell us what we’re missing.
The malaise in the semiconductor industry can best be summed up by the disaster at Intel Corporation, the largest US chip maker. As a supplier of components for computers and servers, Intel is desperately trying to adjust even as it vows to catch up with rivals Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. due to the slowdown. But there will be no cost-cutting. Just in time to help the fourth quarter numbers.
A year ago, the world was short of chips and suppliers were rushing to buy equipment and ramp up production. Last month, they cut 2022 budgets by more than $16 billion and are preparing to cut spending next year.
A recurring theme in this season’s earnings has been the impact of the rising US dollar against nearly all rivals. A few companies are immune, Amazon.com Inc. are the most affected.
Apple Inc. compared to the rest. Looks relatively strong. Its iPhone did very well, however, with availability a touch below estimates and increased availability by a few days. Services, the segment that includes Apple Music and Apple+ TV, the company’s second-largest contributor to revenue, continued to grow strongly, albeit at a lower rate than in previous quarters.
Meta Platforms Inc. Attacked from all sides. Changes to Apple’s privacy rules, which make it harder to track users across apps and lower advertising rates, have hit the owner of Facebook, Instagram and WhatsApp hard. A global recession, including high inflation, is compounding the woes. While user numbers are slowly growing — it has 3.7 billion monthly active users across its family of apps — average revenue per person is falling.
Meanwhile, the social media company is burning cash in its Reality Labs division — founder Mark Zuckerberg’s venture into virtual reality and Metaways, which inspired last year’s name change. That business has lost more than $20 billion to date, 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. The 6.1% increase in third-quarter earnings was the slowest since June 2020, when the Covid-19 pandemic hit. Its Google search-based ad segments are outperforming its network affiliate businesses and video service YouTube, while cloud services are holding firm.
At Microsoft Corp., a decade-long transition away from client computing — where revenue is tied directly to the sale of computer and server hardware — is helping it weather the storm the best it can. Revenue rose just 11% in the September period, the slowest in five years, but still outperformed most tech peers. Its cloud and productivity are the main reasons for this relative strength. Customers — both consumer and corporate — are somewhat wedded to its suite of office products, while those signed up for its Azure cloud services can’t flee when times get tough.
The last two charts show how poorly investors reacted to this news. Stock market downturns are a global, cross-industry phenomenon. Yet the tech sector is faring worse, with the Nasdaq down 30% from a year ago.
Companies that rely heavily on advertising or short-term consumer purchases will suffer the most. Money appears to be shifting to what are seen as more defensive tech stocks, the brightest of which is Netflix Inc.
If there’s any consolation, investors no longer have to worry about Twitter Inc’s fortunes. That’s Elon Musk’s current problem.
More from other writers at Bloomberg Opinion:
• The Chips Act does not work without all the parts of the chip: Thomas Black
• Airbnb hosts who are losing money have three options: Teresa Gilarducci
• Tech investors are overreacting like screaming at a cloud: Tim Culpan
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More stories like this one are available at bloomberg.com/opinion
