The computer sales boom has finally exploded, and chip stocks are taking the hit | Biden News


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Wednesday, July 6, 2022

The decline in PC sales will also hit chip makers

The hot pandemic-era PC market is finally cooling, and that could spell trouble for everyone from PC makers like HP ( HPQ ) to chip makers like Intel ( INTC ) as device shipments collapse. The cause? You guessed it. The relentless trio of inflation, the war in Ukraine, and supply chain disruptions that have hammered seemingly every other industry on the planet.

According to research firm Gartner, consumer PC shipments will fall from 342 million units in 2021 to 310 million units this year, a year-over-year decline of 9.5%. The consumer side of the market will face the worst of the decline, with Gartner projecting shipments to decrease 13.1% year over year. Shipments of business computers will fall 7.2%.

For the computer market, which has seen enormous growth during the pandemic after a steady decline in previous years, the return to Earth will be a major gut check.

“A perfect storm of geopolitical turmoil, high inflation, currency fluctuations and supply chain disruptions has dampened business and consumer demand for devices around the world and is poised to hit the PC market the hardest in 2022,” Gartner senior director analyst Ranjit Atwal said in a statement. statement

Workers monitor operations at chip packaging company Unisem (M) Berhad's factory in Ipoh, Malaysia, October 15, 2021. REUTERS/Lim Huey Teng

Workers monitor operations at chip packaging company Unisem (M) Berhad’s factory in Ipoh, Malaysia, October 15, 2021. REUTERS/Lim Huey Teng

And that decline, in turn, will crash right into chip makers including Intel, AMD ( AMD ), Nvidia ( NVDA ) and Qualcomm ( QCOM ), which depend on both consumer and business PC sales.

PC sales are slowing, but manufacturers remain confident

The PC boom never lasted. Before COVID held people hostage in their own homes and forced them to buy everything from laptops, desktops and Chromebooks to work and learn, consumers increasingly used their smartphones as their primary computing devices.

But something about filling out a spreadsheet or typing a report on a 6.1-inch screen has proven surprisingly unappealing to millions of consumers who have turned to PCs, Macs and Chromebooks to get it all done.

As a result, global PC shipments rose from 309.1 million units in 2020 to 342 million units in 2021, a 10.6% increase. But Gartner expects that to drop to 310 million in 2022, though those numbers are still estimates.

PC makers, however, continue to report solid performance in their consumer divisions, with Dell ( DELL ) reporting record revenue of $15.6 billion in its Client Solutions business with consumer PC sales coming in at $12 billion.

HP, meanwhile, reported record Q2 revenue in its personal systems business during its May earnings call.

“We also delivered [an] operating profit margin of 6.9% at the high end of our target range. We manage our PS portfolio with great discipline, focused on driving profitable revenue growth over units,” CEO Enrique Lores said on the call.

BARCELONA, SPAIN - 2022/02/28: Intel booth seen during the first day of Mobile World Congress 2022 (MWC) at the Fira de Barcelona.  (Photo by Thiago Prudencio/SOPA Images/LightRocket via Getty Images)

A slowdown in PC sales would hurt Intel, but could also soften some of the damage from the ongoing global chip shortage. (Photo by Thiago Prudencio/SOPA Images/LightRocket via Getty Images)

Despite this, Gartner says that global shipments of PCs fell 6.8% in Q1 2022.

Businessmen are also cautious for fear that inflation will cut into consumer spending. Shares of HP are down 17% year to date, barely outpacing the S&P 500, which is down 20% for the year. Dell shares are down even more, dropping 23% for the year.

Chip stocks are taking a beating

A decline in computer sales means a decrease in the number of chips, whether those are CPUs or GPUs, needed for new computers, and that could bring pain to the world’s leading chips. Intel and Nvidia, for example, are holding back on new hires as slowing PC sales compounded by rising inflation and interest rates hit the companies.

Intel’s share price is down 29% year to date on Tuesday, while Nvidia is down 49%. The graphics chip maker isn’t just battling declining PC sales, either. The company is also dealing with a reduction in card sales amid the cryptocurrency crash.

AMD is just as heavily battered, with shares of the PC and GPU maker down as much as 47%. Qualcomm, which has moved into the computer industry in recent years, is down 31% year to date.

While chip makers will feel the sting of slower PC sales going forward, the removal could prove to be a boon for the companies as it may help them emerge from the ongoing chip shortage sooner rather than later.

Earlier, Intel CEO Pat Gelsinger indicated that the shortage would end in 2024, but a slowdown in PC sales might reduce that if only slightly.

However, as PC shipments and sales flag and CPU stocks follow suit, it’s safe to say the bonanza is over. At least for now. From Daniel Hawley, technical editor at Yahoo Finance. Follow him @DanielHowley

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