Here’s Why Last Week Was Terrible for Big Tech

From semiconductors to social media to the cloud, the industry delivered a torrent of bad news, says Tim Culpan

The malaise in the semiconductor industry can be best summed up by the disaster unfolding at Intel Corp., the largest US chipmaker.
By Tim Culpan
October 30, 2022 | 07:18 PM

Bloomberg Opinion — It was indeed a terrible, horrible, no good, very bad week for the tech sector. From semiconductors and social media to computing and the cloud, the world’s biggest companies made plain in earnings reports the raft of challenges they are confronting. With a flood of unfavorable numbers coming their way, investors took in the news and sold.

Most of the biggest tech names managed to regain some ground Friday, propelled by Apple’s (AAPL) comparatively healthy performance. But the overall mood remained glum.

A few hundred different data points were shared with the market. Combined, they tell a tale of industries hit by a strengthening greenback, supply-chain snarls extending into a third year, inflation that is yet to be controlled and economic growth figures that look increasingly grim. We distilled all this down into 10 charts — be sure to tell us what we missed.

The malaise in the semiconductor industry can be best summed up by the disaster unfolding at Intel Corp. (INTC), the largest US chipmaker. As a supplier of components for computers and servers, Intel was hit hard by the slowdown and is desperately trying to adjust even as it pledges to catch up to rivals Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp.

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But the cost cuts won’t come in time to help fourth-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 slashed 2022 budgets by more than $16 billion and are preparing to reduce spending next year.


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A recurring theme in earnings this season has been the impact of a rising US dollar against pretty much every counterpart. Few companies are immune, with Amazon.com Inc. (AMZN) amongst the hardest hit.

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Apple Inc. looks relatively strong compared with all the rest. Its iPhone did quite well, though a touch below estimates and boosted by a few more days of availability. Services, the division that includes Apple Music and Apple+ TV that is the company’s second-largest contributor to revenue, continued to post solid growth, albeit at a slower rate than previous quarters.

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Meta Platforms Inc. (META)is being hit from all sides. The owner of Facebook, Instagram and WhatsApp has been severely damaged by changes to Apple’s privacy rules, which makes it difficult to track users across apps and thus drives down advertising rates. The global downturn, including higher inflation, just adds to the woes. Although user numbers are slowly ticking up — it has 3.7 billion monthly active users across its family of apps — average revenue per person is sliding.

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Meanwhile, the social media company is burning money on 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 to date, and Zuckerberg told investors to expect the shortfall to continue for a while.

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Alphabet Inc. (GOOG) isn’t doing so well, but at least it’s growing. A 6.1% increase in third-quarter revenue was the slowest since June 2020 after the Covid-19 pandemic hit. Its Google search-based advertising divisions are outpacing its network affiliate businesses and video service YouTube, while cloud services  remain solid.

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Over at Microsoft Corp. (MSFT), a decade-long transition away from client computing — where revenue is directly tied to sales of computer and server hardware — is helping it weather the storm better than most. Revenue for the September period climbed just 11%, the slowest in five years, yet that’s much better than most tech peers. Its cloud and productivity offerings are the major reasons for this relative strength. Customers — both consumer and corporate — are somewhat wedded to its suite of Office products, while those who have signed up for its Azure cloud services aren’t in a position to flee when times get tough.

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

Suffering the most are those companies with a large reliance on advertising or short-term consumer purchases. Money appears to be shifting to what might be seen as more defensive technology stocks, and Netflix Inc. shines brightest among them.

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If there’s any solace to be had, it’s that investors no longer have to fret over the fortunes of Twitter Inc. That’s Elon Musk’s problem now.

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.

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