Tech’s Terrible Week, in 10 Charts

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It really 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 biggest companies have revealed the challenges they face in earnings reports. As a flood of negative numbers came their way, investors took note and sold.

Most of the biggest tech names managed to regain some ground on Friday, thanks to Apple’s relatively healthy performance. But the overall mood remained gloomy.

A few hundred different data points were shared with the market. Together, they tell of a strengthening greenback, a supply-chain slump, a third straight year of supply-chain contraction, inflation that is still out of control and economic growth numbers that look increasingly dire. We’ve distilled it all into 10 charts — tell us what we missed.

The unrest in the semiconductor industry can be summed up by the disaster at Intel Corporation, the largest US chipmaker. As a supplier of components for computers and servers, Intel was hit hard by the recession and is trying to adjust even as rivals from Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. vow to catch up but not cut costs. Just in time to help the fourth-quarter numbers.

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A year ago, there was a world shortage of chips and suppliers were rushing to buy equipment and crank up output. Last month, they combined to cut more than $16 billion in the 2022 budget and are preparing to cut spending next year.

A recurring theme of earnings this season is the impact of the rising US dollar relative to each episode. Amazon.com Inc. Some of the hardest hit companies are immune.

Apple Inc. Looks relatively strong compared to all the others. Its iPhone performed fairly well, albeit a touch below estimates and boosted by a few more days of availability. Services, the segment that includes Apple Music and Apple+ TV that is the second-largest contributor to the company’s revenue, continued solid growth, at a lower rate than in the previous quarter.

Meta Platforms Inc. is being hit from 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 on the apps and lower ad rates. A global recession, coupled with high inflation, adds to the woes. Although the number of users is growing steadily — its family of apps has 3.7 billion monthly active users — average revenue per person is falling.

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Meanwhile, the social media company is spending money on its Reality Labs division — founder Mark Zuckerberg’s virtual reality and metaverse that inspired the name change last year. That business has lost more than $20 billion to date, and Zuckerberg told investors the shortfall will continue for some time.

Alphabet Inc. 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. Its Google search-based advertising division is outpacing its network affiliate business and video service YouTube, while its cloud services are holding steady.

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. Revenue climbed just 11% for the September period, the slowest in five years, but still far better than most tech peers. Its cloudiness and productivity are the main reasons for this relative strength. Consumers – both consumer and corporate – are somewhat tied to its suite of office products, while those who sign up for its Azure cloud services are in no position to run away in a pinch.

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Two final charts show how badly investors reacted to all this news. A stock market downturn is a global, cross-industry phenomenon. Yet the tech sector has fared worse, with the Nasdaq down 30% from a year ago.

Companies that rely heavily on advertising or short-term consumer purchases suffer the most. Money seems to be shifting to what could be viewed as more defensive tech stocks, and Netflix Inc. is the brightest among them.

If it’s any consolation, investors no longer need to worry about the future of Twitter Inc. This is Elon Musk’s problem now.

More from other authors at Bloomberg Opinion:

• The law of chips will not work without each part of the chip: Thomas Black

• Airbnb hosts who lose money have three options: Teresa Ghilarducci

• Tech investors overreact like they’re shouting at the cloud: Tim Kalpan

This column does not reflect the views of the editorial board or Bloomberg LP and its owners.

Tim Kalpan 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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