Tech’s Terrible Week, in 10 Charts

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It really was a terrible, terrible, no good, very bad week for the tech sector. From semiconductors and social media to computing and the cloud, the world’s biggest companies have laid bare the raft of challenges they face in earnings. As a flood of unfavorable numbers came their way, investors took the news and sold.

Most of the big tech names managed to gain some ground on Friday, boosted 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 the story of a strong greenback, supply-chain snarls extending into a third year, inflation still out of control and industries hit by increasingly dire economic growth figures. We distilled it all down to 10 charts – be sure to let us know what we missed.

The malaise in the semiconductor industry can best be summed up by the disaster unfolding at the largest US chipmaker, Intel Corporation. As a supplier of components for computers and servers, Intel was hit hard by the recession and is struggling to adjust despite vowing to catch up with rivals Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But cost cuts are not forthcoming. Just in time to help the fourth quarter numbers.

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A year ago, the world was short of chips and suppliers were rushing to buy equipment and crank up output. In the past month, they have collectively cut the 2022 budget by more than $16 billion and are preparing to cut spending next year.

A recurring theme in this season’s earnings is the impact of a rising US dollar against every peer. Amazon.com Inc. Some of the companies that took the biggest hits are on the defensive.

Apple Inc. Looks relatively strong compared to all the rest. Its iPhone did very well, although a touch less than expected and a few days of availability increased. Services, the division that includes Apple Music and Apple+ TV that is the second largest contributor to the company’s revenue, continued to post solid growth, albeit at a slower pace than the previous quarter.

Meta Platforms Inc. Hitting from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by Apple’s changes to privacy rules, which make it harder to track users across apps and thus reduce ad rates. A global recession, including high inflation, adds to the problem. Although user numbers are slowly growing — its family of apps has 3.7 billion monthly active users — 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 prompted last year’s name change. That business has lost more than $20 billion to date, and Zuckerberg told investors to expect the decline to continue for some time.

Alphabet Inc. is not doing well, but at least it is growing. The 6.1% increase in third-quarter revenue was the slowest since June 2020, following the Covid-19 pandemic. Its Google search-based advertising divisions are outperforming its network affiliate businesses and video service YouTube, while cloud services are 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 to weather the storm better than most. Revenues climbed just 11% for the September period, the slowest in five years, but that’s far better than most tech peers. Its cloud and productivity offerings are a major reason for this relative strength. Customers — both consumer and corporate — are somewhat tied to its suite of office products, while those who sign up for its Azure cloud services are in no position to run away when the going gets tough.

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The last two charts show how badly investors have reacted to all this news. Stock market declines are a global, cross-industry phenomenon. Yet the technology sector has fared much worse, with the Nasdaq down 30% from a year ago.

Companies with heavy reliance on advertising or short-term consumer purchases suffer the most. Money appears to have shifted to what could be seen as more defensive technology stocks, and Netflix Inc. The brightest among them.

If there’s any consolation to be had, it’s that investors no longer have to worry about the fate of Twitter Inc. This is Elon Musk’s problem now.

More from other writers at Bloomberg Opinion:

• The Chips Act doesn’t work without every part of the chip: Thomas Black

• Airbnb hosts who lose money have three options: Teresa Ghilarducci

• Tech investors overreact like they’re yelling at the cloud: Tim Kalpan

This column does not necessarily reflect the views 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 are available at bloomberg.com/opinion

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