Tech’s Terrible Week, in 10 Charts

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It’s been a terrible, terrible, bad, bad week for the tech sector. From semiconductors and social media to computers and the cloud, the world’s largest companies have clearly shown in their earnings that they are facing many challenges. With the flood of bad debt coming in, investors seized on the news and sold it.

Most of the big tech names managed to recover in some countries on Friday, thanks to Apple’s positive performance. But everyone was still in a dark mood.

A few hundred different data points were distributed in the market. Together, they share a story about industries affected by the greenback’s strength, supply chain chaos entering its third year, unmanageable inflation and economic growth figures that appear to be worsening. . We’ve broken it all down into 10 plans – let us know what we missed.

The weakness of the semiconductor industry can be summed up by the disaster emanating from Intel Corp., the largest U.S. chip maker. As a supplier of components for computers and servers, Intel has been hit hard by the slowdown and has tried hard to fix it even though it promised to follow suit with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. in time to help fourth quarter numbers.

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A year ago, the world was short on chips, and consumers rushed to buy gadgets and produce products. Last month, they cut funding for 2022 by more than $16 billion and plan to cut spending next year.

A recurring theme in earnings this season is the impact of the rising US dollar against most of its peers. Few companies do not, including Amazon.com Inc. it is among the most difficult.

Apple Inc. is a strong character. to all the rest. His iPhone is doing well, even if it’s hitting below the estimate and increasing a few days it’s available. Services, the division that includes Apple Music and Apple+ TV is the company’s second-largest by revenue, which continued to grow, albeit at a faster pace than previous quarters.

Meta Platforms Inc. is being beaten from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes to Apple’s privacy rules, making it difficult to track users across apps, thereby lowering ad rates. The global recession, as well as rising inflation, will only add to the problems. Although the number of users is increasing – 3.7 billion monthly active users across its family of applications – the average price per person is decreasing.

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Meanwhile, the social media company is burning cash on 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 downturn to continue for some time.

Alphabet Inc. isn’t doing well, but it’s growing. Third-quarter revenue growth was 6.1%, the slowest since June 2020 after the Covid-19 pandemic hit. Google’s search-related ad units are above its network business and YouTube video service, while cloud services remain.

At Microsoft Corp., a decade-long shift away from consumer computing — where revenue is directly linked to the sale of hardware and software — is helping it to better the storm at the majority. Revenues for September rose just 11%, the slowest in five years, but that was better than most tech peers. Its cloud and product offerings are the main reasons for this strength. Consumers – consumers and businesses – are married to its suite of Office products, but those who sign up for its Azure cloud services are not able to run when times are tough.

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Two final charts show how investors reacted negatively to all of this news. Stock market declines are a global, cross-industry phenomenon. However, the tech sector has been doing badly, with the Nasdaq 30% lower than a year ago.

Most likely to suffer are those companies that rely heavily on advertising or short-term consumer sales. Money seems to be moving into what are considered to be more defensive technology stocks, and Netflix Inc. shining through them.

If there is any comfort, investors are no longer disappointed about the fortunes of Twitter Inc. That’s Elon Musk’s problem right now.

More From Other Writers at Bloomberg Opinion:

• The Chips Act will not work without each part of the chip: Thomas Black

• Airbnb Hosts Who Have Lost Money Have 3 Choices: Teresa Ghilarducci

• Tech Owners Make It Feel Like They’re Shouting From The Cloud: Tim Culpan

This post does not reflect the opinion of the editorial board or Bloomberg LP or its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.

More information is available at bloomberg.com/opinion

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