Markets take a knock as tech tumbles, warns of worse ahead

In the latest news from big tech, the earnings are laying out warning signs as Apple, Amazon, Google and Intel add a thick coat of caution to their outlook.

Apple, the world's most valuable company, warned investors that they could possibly see a $8 billion hit to earnings as covid restrictions, which have swept China in recent weeks, will take a toll on the June quarter. The tech giant also warned that demand in China was being sapped by Covid-related lockdowns. Apple CEO Tim Cook added the company was “not immune” to supply chain challenges.

Similar story delivered by e-commerce giant Amazon where revenue increased very modestly at 7% during the first quarter, compared with 44% expansion a year ago. It marks the slowest rate for any quarter since the dot-com bust in 2001 and the second straight period of single-digit growth. The company’s operating margin dipped to 3.2% in the first quarter from 8.2% a year earlier despite adding user fees in the US and also hiking rates for Amazon Prime.

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Google’s earnings shortfall is an indication of trouble across the online-advertising industry as revenue from YouTube was a big miss for the tech firm as many questioned YouTube Shorts ability to take on TikTok. YouTube revenue grew 14.39% to $6.9 billion, its slowest growth in the past five quarters. In the year-ago quarter, for example, YouTube revenue soared 48.7%. CFO Ruth Porat said on the analyst call that YouTube experienced “modest growth” mostly in direct response ad.

Intel’s revenue decreased by 7% year over year and margins also a took a hit narrowing to 50.4% from 55.2%. This however is not the end of the tough road. Speaking to analysts in a conference call Intel CEO Pat Gelsinger warned of a grim outlook for two years “We expect the industry will continue to see challenges until at least 2024 in areas like capacity and tool availability.”

The strain in tech is evident in the stock prices as tech index Nasdaq is now down 20% so far this year as investors shun the ultra-pricey tech sector, which had made gangbuster gains for much of the pandemic.