The parts of the chip business that were initially the strongest, the cloud and data centers, may see issues next. There are indications that growth rates, which have been the backbones of industry support during the pandemic, may progressively diminish, and industries may cut back on data center spending over the cloud.
Since it gained popularity in the last decade as more firms embraced the technology, analysts claim the cloud industry has rarely had to endure a protracted economic downturn, making it more difficult to anticipate whether it will be hurt in a downturn or not.
Consumers are feeling the effects of 40-year-high inflation, and analysts are debating whether or not there are signs of a recession, according to Big Tech businesses. Investors are concerned that Facebook, Snap, and other social networking sites, which are suffering from a decline in advertising, may scale back their plans to invest in data centers, according to Bernstein analyst Stacy Rasgon.
According to the super-earnings week, the IT giant’s annual rise in cloud revenue last quarter showed symptoms of slowing down. Annual revenue growth for the Google Cloud division of Alphabet Inc. decreased by 8%, Azure by Microsoft Corp. decreased by 6%, and AWS Careers by Amazon.com decreased by more than 3% compared to the previous quarter.
While the revenue in the cloud business is still rising rapidly, there are indications of weakness in Europe and other regions, according to Nathaniel Harmon, research director at YipitData. In order to conserve money, the three corporations previously mentioned claimed they would employ data center equipment for an additional three to six years during the outbreak.
Likewise, Glenn O’Donnell, director of research at Forrester Research, similarly cautioned that if data center capital spending were revised, Intel Corp. and Advanced Micro Devices (AMD) would sell fewer processors.
However, the issue goes beyond a mere downturn in the cloud computing business. Sumit Sadana, a chief commercial officer of Micron, claimed that a shortage of some chips has slowed server production and produced an overabundance of other chips, a dilemma comparable to that brought on by a lack of chips for automobiles.
