Tech’s Terrible Week, in 10 Charts

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It’s been a terrible, terrible, bad, bad week for the technology sector. From semiconductors and social media to computing and the cloud, the world’s largest companies have expressed simply in their earnings reports the rakyat of challenges they face. With a flood of bad numbers coming their way, investors took the news and sold.

Most of the biggest tech names were able to regain some ground Friday, boosted by Apple’s relatively healthy performance. But the general situation remains gloomy.

Several hundred different data points are shared in the market. Taken together, they tell a story of industries hit by a strengthening greenback, supply chains stretched for a third year, inflation still out of control and the numbers of economic growth more intense. We’ve distilled it all down to 10 charts — be sure to tell us what we missed.

The malaise in the semiconductor industry can best be summed up by the disaster that befell 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 vows to catch up with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost reduction is not coming. during the helping numbers in the fourth quarter.

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A year ago, the world was short of chips and suppliers rushed to buy equipment and increase output. Last month, they collectively slashed 2022 budgets by more than $16 billion and are preparing to cut spending next year.

A recurring theme in earnings this season has been the impact of the rising US dollar against nearly every counterpart. Few companies are immune, including Amazon.com Inc. among the hardest hit.

Apple Inc. pretty strong compared to all the others. The iPhone has done well in this, although a touch below the estimate and increased by a few more days of use. Services, the division that includes Apple Music and Apple+ TV that is the second largest contributor to the company’s revenue, continues to post strong growth, albeit at a slower rate than last year. quarter.

Meta Platforms Inc. hit on 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 of apps and thus lower advertising rates. A global downturn, including higher inflation, will only add to the woes. Although user numbers are slowly rising – it has 3.7 billion monthly active users across its family of apps – the average revenue per person is declining.

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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 the name change last year. That business has lost more than $20 billion so far, and Zuckerberg told investors to expect the deficit to continue for a while.

Alphabet Inc. not so good, but at least it’s growing. The 6.1% increase in revenue in the third quarter was the slowest since June 2020 after the Covid-19 pandemic hit. Google’s search-based advertising divisions outperformed its affiliate network businesses and YouTube’s video service, while cloud services remained strong.

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 rose just 11%, the slowest in five years, but that was better than most of its tech peers. Its cloud offerings and productivity are the main reasons for this relative strength. Customers – both consumer and corporate – are relatively wedded to the suite of Office products, while those who sign up for its Azure cloud services are in no position to flee when times get tough.

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

The ones that suffer the most are those companies that rely heavily on advertising or short-term consumer purchases. Money appears to be shifting to what appear to be more defensive technology stocks, and Netflix Inc.

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

More From Other Bloomberg Opinion Writers:

• The Chips Act Won’t Work Without All Parts of the Chip: Thomas Black

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

• Tech Investors Overreact Like They’re Yelling at the Clouds: 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 are available at bloomberg.com/opinion

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