(Bloomberg) — Semiconductor stocks extended their lackluster performance in Tuesday morning trading, falling to their lowest since October 2020, as a sharp drop in global PC 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 announcement and new scrutiny of US restrictions on China’s access to American technology. The S&P 500 tech sector has lagged the broader index year-to-date by the most in a generation.
New data from Gartner is adding to the gloom: Worldwide PC shipments sank 19.5% year-on-year in the quarter, the biggest decline since the firm began tracking the PC market in the mid-1990s. Supply chain issues have eased, but high inventory remains a significant issue today due to weak demand from both consumers and businesses.
Gartner pointed to particularly disappointing back-to-school sales, despite big promotions and price drops, as many people bought new computers over the past two years. (Another wave of discounting has yet to come with holiday promotions, providing some comfort to the Fed as it focuses on fighting higher prices.)
In the US, laptop shipments fell in the fifth quarter, down 17%, led by laptops. However, there was one encouraging sign: desktops grew slightly, driven by small and medium-sized enterprises and the public sector. Interestingly, earlier data that showed US small business optimism is still low improved for a third straight month in September, with companies becoming more upbeat about sales. It’s worth noting that aspects of AMD’s business beyond PCs, including data center growth, weren’t so bad.
In other regions, shutdown operations in Russia and the Chinese blockade have (unsurprisingly) hurt PC demand. And the overall economic outlook isn’t great, with recent warnings from the IMF and JPMorgan’s Jamie Dimon weighing on tech and other stocks.
- NOTE: Felice Maranz writes for Bloomberg’s Markets Live blog. The observations he makes are his own and do not constitute investment advice. For more market commentary, see the MLIV blog
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