US Chipmakers Worry About Slow Growth of Cloud and Data Centers

Photo Credit: twitter/ @Azure

Cloud and data centers, the chip industry's strongest sector, could be its next problem: Signs are showing that growth in what has been a pillar of the COVID era may slow as consumers turn to cloud-based entertainment. Signed up for and companies reopened their offices.

Analysts say the cloud market has rarely experienced the prolonged economic downturn it has seen in the past decade as more businesses have adopted the technology, making it difficult to predict. Whether it is recession proof or will face economic crisis.

As 40-year high inflation weighs on consumers and economists debate signs of recession, advertisers are tightening their purse strings, big tech companies say.

"Investors are worried that this is going to be the next shoe to drop," Bernstein analyst Stacey Rasgan said, adding that data center investment has been cut by the advertising drought that has hurt the likes of Facebook and Snapchat. May be.

Big tech reported the slowest annual rate of cloud revenue growth this earnings season — Alphabet's Google Cloud fell more than 8 percentage points, Microsoft's Azure fell 6 percentage points, and Amazon.com's AWS last quarter. It fell more than 3 percentage points month-on-month.

Nathaniel Harmon, research director at YipitData, said cloud market revenue growth is still significant, although noting that there is a lack of weakness in regions such as Europe.

All three companies have also said during the pandemic that they will keep data center equipment longer, in some cases up to six years, up from three, to save money.

"If they're going to reduce their spending on data center capacity, it's less chips than Intel or AMD," said Glenn O'Donnell, research director at Forrester Research.

The concern was exacerbated by Intel's data center and AI group business falling 16 percent to $4.6 billion (about Rs 36,521 crore), beating Wall Street estimates by about $2 billion (about Rs 15,883 crore) in its latest quarterly earnings. Crores of Rs.) is lacking.

And last week Micron Technology warned of a worse-than-expected outlook, this time adding that there was trouble not only in PCs and smartphones, but also in the cloud.

But it's not as simple as the slow growth of the cloud market that's causing the problem, Micron Chief Business Officer Sumit Sadana told Reuters. Part of the problem was the shortage of some chips that prevented servers from being built, causing other chips to pile up — a similar situation to the auto chip shortage.

According to Richard Barnett, SupplyFrame's chief marketing officer, inventories in the server supply chain are at record highs but critical parts are missing. "Suppose a server needs 500 components, and 10 or 20 unavailable parts are preventing completion."

Yet Sadana cautioned that companies worried about the economy are also becoming more conservative about buying chips.

O'Donnell at Forrester said he's seeing it in the tech sector. "As we're talking to our customers about their spending plans, a lot of them are saying, well, you know, we're not going to turn off the faucet, but we're going to turn it down a little bit. going to close," he said. "You'll see some of that reflected in the earnings of companies like Dell and Hewlett-Packard Enterprise."

While executives and analysts debate the impact of slower growth in the cloud market, Super Microcomputer Inc., which specializes in custom servers for new technology, said self-driving cars and Meta Developments like Ayat are still making waves. demand