Tech’s Terrible Week, in 10 Charts

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It has certainly been a bad, bad, bad, bad week in the tech industry. From semiconductors and social media to computing and the cloud, the world’s biggest companies have made clear in their earnings reports the number of challenges they face. As the flood of negative numbers comes in, investors take the news and sell it.

Most of the big tech names managed to regain ground on Friday, boosted by Apple’s relatively healthy performance. But the mood remained sour.

Several hundred different data points are shared with the market. Combined, they tell the story of industries hit by a strengthening greenback, supply-chain snarls reaching a third year, inflation still under control and economic growth numbers looking grim. We’ve covered all of this in 10 charts – be sure to tell us what we missed.

The malaise in the semiconductor industry can best be summed up by the crisis unfolding at Intel Corp., the largest US manufacturer. As a supplier of computer and server components, Intel has been hit hard by the slowdown and is scrambling to recover as it bids to catch up with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost cuts will not come. in time to help the numbers for the fourth quarter.

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

A continuing theme in earnings this season has been the impact of the rising US dollar against all of its peers. Few companies are immune, and Amazon.com Inc. it is among the most difficult.

Apple Inc. it looks powerful compared to everything else. Its iPhone has done quite well, although the touch below is measured and enlarged for a few more days of availability. Services, a division that includes Apple Music and Apple+ TV that is the company’s second largest revenue segment, continued to post strong growth, albeit at a slower pace than previous areas.

Meta Platforms Inc. it is struck from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes in Apple’s privacy rules, which make it difficult to track users across applications and thus reduce the level of advertising. Global inflation, including hyperinflation, only adds to the misery. While user numbers are growing slowly — it has 3.7 billion monthly active users across its entire family of apps — average revenue per capita is flat.

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

Alphabet Inc. it’s not doing so well, 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. Its Google search-based advertising divisions are outpacing its YouTube affiliate network businesses, while cloud services remain strong.

Over at Microsoft Corp., a decade-long transition away from client computing — where revenue was 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’s still better than most tech peers. Its cloud and productivity offerings are the main reasons for this relative strength. Customers – both consumers and companies – are somewhat wedded to Office products, while those who subscribe to its Azure cloud services are in no position to run away when times get tough.

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The last two charts show how investors have misbehaved on all of these issues. Stock market declines are a global, industry-wide phenomenon. However, the technology sector fared the worst, with the Nasdaq down 30% from a year ago.

The ones that suffer the most are those companies that rely heavily on advertising or short-term consumer purchases. Money seems to be shifting to what might be seen as more defensive tech stocks, and Netflix Inc. it shines brightly among them.

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

More from other Bloomberg Opinion writers:

• The Chips Act Won’t Work Without Every Chip Part: Thomas Black

• Airbnb Hosts Who Are Losing Money Have Three Options: Teresa Ghilarducci

• Tech Investors Overreact Like 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. He was previously a technology reporter for Bloomberg News.

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

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