What happened
Shares of some of the world's biggest technology companies languished on Friday after several days of positive gains for the market. Semiconductor specialist Nvidia (NVDA 3.71%) was down as much as 5.5%, iPhone maker Apple (AAPL 0.52%) was off by as much as 4.5%, and e-commerce kingpin Amazon (AMZN -1.65%) slipped as much as 3.5%.
While each of the stocks recovered slightly, as of 2:44 p.m. ET, the stocks were down 4%, 3.6%, and 2.2%, respectively.
New warnings about the possibility of a recession sent a wide swath of stocks lower today, but there was also company-specific news for each of the technology stalwarts.
Image source: Getty Images.
So what
Tesla CEO Elon Musk joined the chorus of business leaders sounding the alarm about the economy and the possibility of a recession. In an email to staff, Musk admitted having a "super bad feeling" regarding the economy, leading to a decision to cut 10% of the electric vehicle (EV) maker's staff, according to a report by Reuters.
This came on the heels of a similar dire warning by vocal JPMorgan Chase CEO Jamie Dimon, who said at a recent conference the company is preparing for an economic "hurricane" this year, fueled by surging inflation and the war in Ukraine.
These statements weighed on Wall Street Friday, sending the Nasdaq Composite and the S&P 500 down 2.3% and 1.4%, respectively (as of this writing). Yet there were company-specific issues that helped fuel the stock price declines for the tech triad.
Morgan Stanley analyst Katy Huberty dug into the latest data provided by Sensor Tower and concluded that Apple's App Store sales growth decelerated last month, with revenue growth slowing to 4% year over year, down from an estimated 8% growth in April. Huberty said that slowing was broad-based across most regions -- except for the U.S. market. Evercore analyst Amit Daryanani had similar concerns, noting the slowdown was "somewhat surprising," given the expectation for accelerating growth.
Amazon announced that its CEO of Worldwide Consumer, Dave Clark, was leaving the company "to pursue other opportunities." Clark has been with Amazon for 23 years; he joined the company just one day after completing his MBA program. In an email to his team, Clark said it was time to "start a new journey." He admitted that he had been planning the move for some time, sharing his decision with family and friends, but was waiting for the right time.
CEO Andy Jassy has yet to appoint a successor, but will likely make an announcement in the coming weeks.
Finally, if reports are to be believed, users may have to wait a while longer for Nvidia's next-generation ray-tracing chips. The RTX 40 series was rumored to be in the testing phase and slated to be released as early as September. However, the latest scuttlebutt suggests that development is still underway, with numerous steps remaining before the semiconductors can begin the manufacturing process.
If the latest rumors are true, it will be at least late 2022 before the chips hit store shelves, if not later.
Now what
It's important to put all this news into context. While the drumbeat warning of a recession may be increasing, it will be at least another month before it's certain. It takes two successive quarters of declining gross domestic product (GDP) to signal the start of a recession. U.S. GDP fell by 1.4% in the first quarter, so it remains to be seen if the economy is, in fact, at the start of a recession. If that turns out to be the case, it's important to remember that this is all a part of the normal economic cycle.
Furthermore, each of these company-specific developments is part of regular business operations and are decidedly short-term in nature. App Store sales will no doubt change from month to month, company executives will come and go, and research and development cycles will vary depending on the product.
That said, there's a reason why Amazon is the undisputed e-commerce and cloud computing leader, Apple makes more money on smart phones that any other company, and Nvidia is the leader of graphics processing units for gaming and data centers.
With fears of a recession growing, there's little doubt some shareholders are taking profits after the recent run-up. That shouldn't make any difference to savvy investors with a long-term time horizon.
