Tech’s Terrible Week, in 10 Charts


It was indeed a terrible, terrible, not good, very bad week for the tech sector. From semiconductors and social media to computing and the cloud, the world’s biggest companies explained in earnings reports the multitude of challenges they face. With a flood of unfavorable numbers coming in, investors took the news and sold.

Most of the biggest tech names managed to regain some ground on Friday, driven by Apple’s relatively healthy performance. But the general mood remained gloomy.

Several hundred different data points were shared with the market. Combined, they tell a story of industries hit by a strengthening greenback, supply chain grumbles stretching into a third year, inflation that is still under control and economic growth figures that look increasingly grim. We’ve distilled all of this down into 10 charts – be sure to tell us what we missed.

The malaise in the semiconductor industry can best be summed up by the disaster unfolding at Intel Corp., the largest US chipmaker. As a supplier of components for computers and servers, Intel has been hit hard by the slowdown and is desperately trying to adjust even as it promises to catch up with rivals Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost cuts will not come. on time to help fourth quarter numbers.

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A year ago, the world ran out of chips and suppliers rushed to buy equipment and increase production. In the past month, they have collectively reduced 2022 budgets by more than $16 billion and are preparing to reduce spending next year.

A recurring theme in earnings this season has been the impact of a rising US dollar against almost all peers. Few companies are immune, with Inc. among the most affected.

Apple Inc. looks relatively strong compared to all the rest. Its iPhone did quite well, albeit a touch below estimates and boosted by a few more days of availability. Services, the division that includes Apple Music and Apple+ TV, which is the company’s second largest contributor to revenue, continued to post solid growth, albeit at a slower pace than previous quarters.

Meta Platforms Inc. is hit from all sides. The owner of Facebook, Instagram and WhatsApp has been seriously damaged by changes to Apple’s privacy rules, which makes it harder to track users across apps and thus lower advertising rates. The global downturn, including higher inflation, only adds to the problems. Although user numbers are slowly rising — it has 3.7 billion monthly active users across its family of apps — average revenue per person is slipping.

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Meanwhile, the social media company is burning cash in its Reality Labs division — founder Mark Zuckerberg’s venture into virtual reality and the metaverse that inspired last year’s name change. That 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. A 6.1% increase in third quarter revenue was the slowest since June 2020 after the impact of the Covid-19 pandemic. Its Google search-based ad units are outperforming its online affiliate businesses and video service YouTube, while cloud services remain solid.

At Microsoft Corp., a decade-long transition away from client computing — where revenue is tied directly to sales of computer and server hardware — is helping it weather the storm better than most. Revenue for the September period climbed just 11%, the slowest in five years, but that’s far better than most tech peers. Its cloud and productivity offerings are the main reasons for this relative strength. Customers – both consumers and companies – are somewhat wedded to its suite of Office products, while those who have signed up to its Azure cloud services are unable to flee when times get tough.

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Two final charts show how badly investors reacted to all this news. The stock market downturn is a global, cross-industry phenomenon. However, the technology sector fared much worse, with the Nasdaq 30% lower than a year ago.

Those companies with a heavy reliance on advertising or short-term consumer purchases suffer the most. Money appears to be shifting to what could be seen as more defensive technology stocks, and Netflix Inc. shines brightest among them.

If there’s any consolation, it’s that investors no longer have to worry about Twitter Inc.’s fortunes. That’s Elon Musk’s problem right now.

More from Other Writers at Bloomberg Opinion:

• Cockroaches Law Won’t Work Without Every Part of the Chip: Thomas Black

• Money-Losing Airbnb Hosts Have Three Options: Teresa Ghilarducci

• Tech Investors Overreact As They Shout at Cloud: Tim Culpan

This column does not necessarily reflect the opinion of the editorial staff 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.

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