Tech earnings reports could signal calm or chaos

Many of the industry’s biggest players—Microsoft, Apple, Tesla, Intel, Samsung, General Electric—will report holiday-quarter earnings over the next few days, offering a small-scale litmus test on the sector’s health.

The reports come as tech stocks continue to tumble amid a wide range of headwinds, including  looming interest rate hikes, rising bond yields, a cooling off of the stimulus-infused economy, and global supply shortages. Following the closing bell Monday, the tech-heavy Nasdaq 100 is down 11% since the start of January, slightly worse than the 7% decline in the S&P 500 during that stretch.

The past few days only added to the anxiety. Netflix last week reported an underwhelming forecast for subscriber growth to start 2022, joining a growing list of companies that boomed during the pandemic before slumping as people returned to regular routines. Meanwhile, rumblings about bursting bubbles in the tech industry—and the economy at large—started gaining more steam.

“The last-hour selling and the consistent selling each day does seem like institutions are done being patient and rushing to get out,” Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, told Bloomberg.

Still, there’s reason for optimism heading into this week.

Microsoft, fresh off its announcement of a $68.7 billion all-cash acquisition of video game developer Activision Blizzard, is projected to post record quarterly revenue Tuesday on the back of its fast-growing cloud software business. Microsoft has beaten analysts’ expectations for 11 straight quarters, and its $292 share price sits well below analysts’ target price of $373, per TipRanks.

Tesla enters its Wednesday earnings report with momentum following a record fourth-quarter of shipments, which topped 300,000 vehicles. However, the company remains vulnerable to supply chain disruptions in 2022 despite navigating chip shortages better than many competitors last year.

Intel also will look Wednesday to build on the optimism of last week’s pledge to spend $20 billion-plus on an Ohio manufacturing complex. While the chipmaker has reshaped its narrative a bit in the first 11 months of CEO Pat Gelsinger’s tenure, Wall Street hasn’t yet bought in. Its stock remains down 19% since Gelsinger took over.

Apple also figures to report record sales and profits Thursday, though its ability to match expectations will largely depend on how much supply chain woes cut into its revenues. 

Nikkei Asia, Bloomberg, and other outlets reported in late 2021 that Apple had scaled back iPhone and iPad production due to a shortage of chips. The holiday quarter historically ranks as Apple’s best of the year.

Dan Ives, a managing director and senior analyst focused on tech at Wedbush Securities, said the next two weeks will be “a pivotal time” for the sector.

“If we start to see fundamental weakness, you start to see where spending is really starting to decelerate, (chief information officers) are starting to get more cautious, digital transformations aren’t happening—if that happens, that’s a thesis changer,” Ives told Bloomberg.

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Jacob Carpenter

NEWSWORTHY

An EV battery jolt. Panasonic plans to spend $700 million on plant construction and equipment to ramp up production of longer-lasting electric vehicle batteries, with Tesla in line to start receiving shipments as early as 2023, Nikkei Asia reported Monday. The Japanese conglomerate expects the new lithium-ion batteries will boost the range of electric vehicles by about 15%, potentially taking the range of a single Tesla Model S charge to about 470 miles. Tesla CEO Elon Musk has said the company plans to make its own batteries, but Panasonic remains one of its largest battery suppliers in the meantime.

Crypto bounces around. The two leading cryptocurrencies dipped Monday to their lowest value since July 2021, then made a fierce afternoon rally that mirrored the U.S. stock market, CNBC reported. The price of Bitcoin and Ethereum were up 2% as of the late afternoon behind their biggest single-day rally of the new year. Both cryptocurrencies remain nearly 50% lower than their November 2021 peaks, declines that exceed the recent stock market swoon.

More Google legal headaches. The attorneys general of Indiana, Texas, Washington, and Washington, D.C., filed lawsuits Monday against Google, alleging the company misled consumers about privacy options across its platforms, The New York Times reported. The bipartisan quartet argues that Google violated consumer protection laws by designing its settings options in ways that tricked people into allowing the company to track their usage data. Google officials said the lawsuit is “based on inaccurate claims and outdated assertions about our settings.”

Folding on Foley? An activist Peloton investor made a public push Monday for the firing of CEO and co-founder John Foley amid a dramatic decline in the exercise company’s stock over the past year, The Wall Street Journal reported. Blackwells Capital, which has a stake of less than 5% in Peloton, also called for Peloton’s board to put Peloton up for sale, floating Apple, Disney, Sony, and Nike as potential buyers. Foley and other Peloton insiders control about 80% of the company’s voting power.

FOOD FOR THOUGHT

Not yet the Jetsons. We’ve been promised self-driving cars, quantum computers, scary-level artificial intelligence, and a litany of other futuristic tech by now. So why don’t we have them already? The New York Times’ Cade Metz explored the question Monday, ultimately reaching a pretty benign answer: this stuff is really hard. Mostly, blame the laws of physics and our unrealistic expectations for progress.

From the article:

In recent years, the tech industry’s critics have noticed that its biggest promises—the ideas that really could change the world—seem further and further on the horizon. The great wealth generated by the industry in recent years has generally been thanks to ideas, like the iPhone and mobile apps, that arrived years ago.

Have the big thinkers of tech lost their mojo?

The answer, those big thinkers are quick to respond, is absolutely not. But the projects they are tackling are far more difficult than building a new app or disrupting another aging industry.

IN CASE YOU MISSED IT

Coinbase shares plunge as crypto crash wipes out $1.4 trillion in value since peak, by David Meyer

Sportstech is creating a player-centric future, by Steve Murray

Peloton’s turbulent week includes another heart attack on TV, by Mark Gurman and Bloomberg

BlackRock plans a blockchain and tech ETF amid crypto meltdown, by Katie Greifeld and Bloomberg

Quitting has become contagious, by Kelli Korducki

Hong Kong’s mass hamster cull prompts an NFT protest as animals are ‘resurrected’ online, by Yvonne Lau

A small group of Activision Blizzard employees are forming a union, by Jason Schreier and Bloomberg

BEFORE YOU GO

So, where’s the honeymoon? Some people get married in a church. Some couples get hitched in a Hilton. Then there’s Delian Asparouhov and Nadia Eghbal. As The Information delightfully reported this weekend, the admittedly offbeat pair tied the knot this month at Hereticon, the Peter Thiel-backed convention for people with unpopular tech opinions. You can read all about the happy couple in the link, but this bridesmaid quote is all you really need: “I think it made sense that they would want people talking about aliens and watching their nuptials in the same hour.”