Tech’s Terrible Week, in 10 Charts

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It 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 largest companies have made it clear in earnings reports the challenges they are facing. With a flood of negative numbers coming their way, investors took the news and sold.

Most of the biggest tech names managed to regain some ground Friday, boosted by Apple’s comparable performance. But the whole mood is still glum.

Several hundred different concepts are introduced to the market. Together, they tell a story of an economy plagued by cash-back incentives, supply chains that have continued for a third year, inflation that is still out of control and the Debt growth of the economy that seems to be increasing. We distilled all of this into 10 charts – be sure to tell us what we missed.

The weakness in the semiconductor industry can best be summed up by the collapse of Intel Corp., the largest US chipmaker. As a supplier of components for computers and servers, Intel has been plagued by slow performance and needs to reform even as it vows to catch up with Taiwanese rivals. Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the price cut will not come. in time to help the fourth number.

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A year ago, the world was short of chips and vendors rushed to buy equipment and crank up output. Last month, they collectively cut the 2022 budget by more than $16 billion and are planning to cut spending next year.

A recurring theme in earnings this season is the impact of rising U.S. inflation against pretty much every competitor. A few companies are protected, with Amazon.com Inc. of the most difficult.

Apple Inc. seems stronger compared to all the rest. His iPhone is doing very well, even a touch below the forecast and supported by a few more days of availability. Services, a division that includes Apple Music and Apple + TV as the company’s second-largest contributor to revenue, continues to post growth, albeit at a lower rate than our months ago.

Meta Platforms Inc. was beaten from all sides. The owners of Facebook, Instagram and WhatsApp have been seriously damaged by changes to Apple’s privacy policy, which makes it difficult to track users across apps and thus increase costs. out. The global recession, including higher inflation, will only add to the misery. Although user numbers are slowing — it has 3.7 billion monthly users across its family of apps — average revenue per person is sliding.

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Meanwhile, the social media company is burning money at its Reality Labs division – founder Mark Zuckerberg’s venture into virtual reality and the metaverse that happened last year to change its name. That business has lost more than $20 billion to date, and Zuckerberg told investors to expect the decline to continue for a while.

Alphabet Inc. didn’t do well, but at least he grew. The 6.1% increase in quarterly revenue was the slowest since June 2020 after the Covid-19 pandemic. Its Google search-based advertising distribution has been overtaken by its affiliate network and video service YouTube, while cloud services have remained stable.

At Microsoft Corp., a decade-long shift away from consumer computing — where revenue went directly to the sale of computer and server equipment — helped it weather the storm. Black wind is better than most. Revenue in September rose just 11%, the slowest in five years, but that’s better than most peers. Its cloud and product offering is the main reason for this relative strength. Customers – both customers and partners – are a wedded to its Office products, while those who have signed up for its Azure cloud services not in a position to escape when times are tough.

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The last two charts show how badly investors reacted to all this news. The economic downturn is a global, cross-economic phenomenon. However, the tech market has fared worse, with the Nasdaq down 30% from a year ago.

Most vulnerable are companies that rely heavily on advertising or short-term customers. Funds are likely to shift to what is seen as a more defensive market, and Netflix Inc. the brightest of them.

If there is any consolation to be had, it is that investors do not have to worry about the results of Twitter Inc. That’s Elon Musk’s problem now.

More From Another Writer at Bloomberg Opinion:

• Chips Act will not work without all parts of Chip: Thomas Black

• Money-losing Airbnb hosts have three options: Teresa Ghilarducci

• Tech Investors Overreact Like They’re Yelling at Clouds: Tim Culpan

This article does not necessarily reflect the views of the board of directors 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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