(Bloomberg) — Semiconductor stocks extended their underperformance in Tuesday morning trading, sliding to the lowest since October 2020, as a sharp decline in global computer shipments added to concerns about soft demand. Tech mega-caps were among the S&P 500’s top decliners by value.
The sector has been battered this year, most recently by AMD’s disappointing forecast, and with new scrutiny over US restrictions on China’s access to US technology. The S&P 500 tech sector lags the broader index year-over-year by the most in a generation.
Recent figures from Gartner add to the gloom: Worldwide PC shipments fell 19.5% year over year in 3Q, the steepest decline since the company began tracking the PC market in the mid-1990s. Supply chain has eased, but high inventory is now a major issue due to weak demand from both consumers and businesses.
Gartner flagged particularly disappointing sales at school — even with massive promotions and pricing, because many people have new computers bought in the last two years. (Another wave of discounts will still come with holiday promotions, perhaps offering the Fed some comfort as it focuses on fighting higher prices.)
In the US, PC shipments fell for a fifth quarter, sliding 17%, led by laptops. Despite this, there was an encouraging sign: Desktops grew somewhat, driven by small and medium enterprises and the public sector. Interestingly, earlier data showed still low optimism about US small business improving for a third month in September, with firms more optimistic about sales. It’s also worth noting aspects of AMD’s business beyond PCs, including data center growth, haven’t been so bad.
In other regions, shutdown operations in Russia and a blockade in China are (unsurprisingly) hurting PC demand. And the overall economic outlook isn’t great, with the latest warnings coming from the IMF and JPMorgan’s Jamie Dimon weighing on technology and other equities.
- NOTE: Felice Maranz writes for Bloomberg’s Markets Live blog. The observations she makes are her own and are not intended as investment advice. For more market commentary, see the MLIV blog
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