Tech’s Terrible Week, in 10 Charts

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It’s been a terrible, terrible, bad week for the tech sector. From semiconductors and social media to computing and the cloud, the world’s largest companies report the many challenges they face. With a flood of unfavorable numbers coming their way, investors embraced the news and sold.

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 glum.

Several hundred different data points were shared with the market. Together, they tell a story of industries hit by a deepening green recession, supply chain snarls stretching into a third year, inflation still under control and economic growth figures looking bleaker. We distilled all this down into 10 charts – be sure to tell us what we missed.

The malaise in the semiconductor industry is best summed up by the disaster at Intel Corp., the largest chip maker in the United States. As a supplier of components for computers and servers, Intel has been hit hard by the slowdown and is struggling to adjust even as it vows to catch up with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost cuts will not come in time to help 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 reduced 2022 budgets by more than $16 billion and are preparing to cut spending next year.

A recurring theme in this season’s earnings was the impact of the rising US dollar on just about everyone else. Few companies are exempt, and Amazon.com Inc. are the most difficult.

Apple Inc. looks quite strong compared to all the rest. His iPhone did well, although a touch below estimates and added a few extra days of availability. Services, the division that includes Apple Music and Apple+ TV and is the company’s second largest contributor to revenue, continued to grow solidly, albeit at a slower rate than the previous quarter.

Meta Platforms Inc. being beaten from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes to Apple’s privacy rules, which makes it difficult to track users across apps and thus lowers advertising rates. The global downturn, including higher inflation, adds to the woes. Although the number of users is slowly increasing – 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 cashing in on its Reality Labs division — founder Mark Zuckerberg’s venture into virtual reality and the metaverse that prompted the name change last year. 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. isn’t doing so well, but at least it’s growing. Third quarter revenue growth of 6.1% was the slowest since June 2020 following the Covid-19 Pandemic. Its Google search-based advertising divisions are outpacing its network affiliates and its YouTube video service, while cloud services remain solid.

At Microsoft Corp., a decade-long shift away from client computing — where revenue is tied directly to computer and server hardware sales — is helping it weather the storm better than most. Revenue for the September period rose just 11%, the slowest in five years, but that’s far better than most tech peers. The cloud and productivity offerings are the main reasons for this relative strength. Customers – both consumers and corporate customers – are somewhat wedded to its suite of Office products, although those who have signed up to its Azure cloud services are unable to flee when times are 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 is much worse, with the Nasdaq 30% lower than a year ago.

Those companies that rely heavily on advertising or short-term consumer purchases are suffering the most. Money appears to be shifting to more defensive tech stocks, the brightest among them being Netflix Inc.

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

More from Other Writers at Bloomberg Opinion:

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

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

• Tech Investors React Like They Shout: 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. Before that, he was a technology reporter for Bloomberg News.

More stories like this are available at bloomberg.com/opinion

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