Can These Stocks Shrug Off A Decline In PC Sales?

Tickers in this article: AMD ARMH INTC MU NVDA STX WDC

Chris Lau, Kapitall: PC sales continue to fall, frustrating tech companies and investors alike. But some bright spots remain. 

PC shipments have been downgraded again, so to speak. Market research firm IDC reduced its forecast for global PC shipments, predicting a drop of 9.7% this year. This is a sharp decline from their March 2013 prediction, in which IDC had forecast just a 1.3% drop in shipments. Growth in tablets and mobile devices carry much of the blame, but demand for PCs in emerging markets like China has also slowed.

[Read more from Kapitall: Goodbye Quantitative Easing: 6 Stocks for September]

PC decline doomsday nothing new

PCs haven’t gone the way of the floppy disk yet, and the market will continue to support many industry players. Gamers who rely on PCs spend heavily on high-end discrete graphics products, according to Jon Peddie Research. Advanced Micro Devices (AMD) and Nvidia (NVDA) will continue to sell graphics cards. More importantly, sustained sales and profits from graphics cards can help offset low margins from new business ventures. AMD is expanding in the console market, as Nvidia is venturing into handheld gaming devices and is pursuing mobile options for its Tegra chipset.

Click on the interactive charts below to see data over time.

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Semiconductors

Micron Technology (MU) relies on PC demand, but has also expanded into other segments. Dynamic random-access memory (DRAM) produced by Micron is used in PCs, but the company supplies memory and flash solutions for mobile devices as well.

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Cloud suppliers

Western Digital (WDC) and Seagate (STX) are storage suppliers that could be hurt by lower PC sales, but higher mobile device demand could fuel greater need for cloud storage. Intel (INTC) and ARM Holdings (ARMH) are two companies that supply processors for servers – ARM already produces one for many mobile devices. Intel is working slowly, but is looking to have its Atom chip powering mobile devices too. The chart below illustrates the POP – price of profitability (or forward P/E) – for ARM in particular:

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