Opinion: More and more tech companies are experiencing a spring swoon

Nvidia Corp., Nutanix Inc. and Snowflake Inc. all issued earnings forecasts that came in below analysts’ expectations on Wednesday, the latest in a series of tech companies to warn about changing macroeconomic conditions.

Those lowered forecasts are now hitting most of the tech sector, from social media company Snap Inc. SNAP.
; chip manufacturer Nvidia NVDA,
; two cloud computing companies, Nutanix NTNX,
and Snowflake Inc. SNOW,
; and networking giant Cisco Systems Inc. CSCO,
Some have cited lockdowns in China that began in late March impacting the global supply chain, but Snap and Snowflake cited broader macroeconomic concerns.

What most of these companies have in common is that their fiscal quarters ended a month later than the first quarter of the standard calendar. So, these earnings reports are for the quarter ended April 30 or May 1, giving investors a month’s worth of fresh data. Snap spoke at a JP Morgan conference and regulatory filing on Monday about how the economy had “continued to deteriorate at an accelerated rate,” creating a ripple effect in a nervous market, and Snowflake said Wednesday that it was affecting the consumption of some of its Customer Believes Patterns Are Negatively Affected By “Macroeconomic Headwinds”.

On Wednesday, chipmaker Nvidia said it expects its gaming business, which grew 31% year over year last quarter, to decline sequentially in the teens in the current fiscal second quarter.

“It’s really about the COVID shutdowns in China,” Nvidia chief financial officer Collette Kress told MarketWatch. “It’s so much more challenging. The only thing they buy is food, that’s the only thing they can buy.”

She also said the business loss from Russia will eat into Nvidia’s data center revenue by about $100 million, and the combined loss in gaming revenue from Russia and China will add another $400 million, a total slump of Its second quarter is $500 million.

Kress said the company was slowing hiring after hiring several thousand people last year to prepare for a slowing economy, but she added that the company’s fundamentals “are still strong,” noting that Nvidia’s data center business is up 80%. in the district. When asked if she felt the economy was headed for a recession, she said it was hard to tell.

“Did I think that three months ago we would get into this situation that the whole world is facing?” she said. “We have the war in Ukraine and the latest lockdowns in China, these are not things that only affect these two regions. We need to watch these things closely.”

At least one analyst is looking for the positives and the fact that some tech stocks are cheap right now.

“While the chip sector and supply chain malaise in China (zero COVUD policy) remains the elephant in the room, the road is currently focused on the consumer and business demand picture (SNAP, retailers) with a tinge of weakness in stocks take a leg down,” said Dan Ives, an analyst with Wedbush Securities, in a note late Wednesday. “In short, our view is that technology stocks have over corrected and cloud/cyber names in particular are grossly oversold at current levels based on our recent field reviews.”

Amid the overall battered market, shares in most of these companies fell in after-hours trading on Wednesday, with Nutanix falling over 30%, Nvidia nearly 7%, and Snowflake nearly 14%. Tech investors are getting warning signs that the second calendar quarter is unlikely to be as good as previously expected for many companies across multiple sectors, and they’re not waiting to see which will be hit the hardest. Opinion: More and more tech companies are experiencing a spring swoon

Brian Lowry

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