Photograph by Ethan Miller/Getty Images
Tech is bracing for some genuine fear and loathing in Las Vegas next week.
Against a backdrop of a shaky stock market, tariff talk with China, and the threat of a recession roiling the tech and chips markets, the massive Consumer Electronics Show kicks off Jan. 6 in Las Vegas.
A year ago, Nvidia (NVDA) was tech's hottest stock. Apple (AAPL) was well on its way to becoming the first publicly traded U.S. company to reach $1 trillion in market value. Now, all bets are off: Their stocks ended the year essentially flat and up 1%, respectively. The worst came after early October: Nvidia stock plunged 53%, while Apple stock sank 33%. (The jury is still out on Nvidia over issues of lackluster demand, though Apple's stock is expected to bounce back in 2019.)
Micron Technology (MU) CEO Sanjay Mehrotra projected unbridled optimism when he met with Barron's at CES a year ago, and his company reported better-than-expected fiscal-second-quarter results in March with an upbeat third-quarter outlook.
But his chip company's shares have plunged 23% in 2018, and it offered a gloomy forecast during the fiscal first-quarter earnings report on Dec. 18. Micron said sales for its February quarter will be between $5.7 billion and $6.3 billion, compared to the $7.26 billion average forecast.
Weakness in the chip market has had a ripple effect throughout tech, underscoring a slowdown in customer demand while heightening concerns about an economic downturn.
There's muted optimism in Silicon Valley over the 2019 tech initial public offering (IPO) class, which "could be the best year in at least a decade," according to Sandy Miller, a general partner at Institutional Venture Partners and one of the deans of Silicon Valley's iconic Sand Hill Road. IVP is an investor in Slack Technologies and CrowdStrike, two of the hottest-rumored IPOs in 2019. The valley's reservations, Miller said, have been underscored by "no parties before the actual IPO."
Many tech IPO candidates are fully aware they are "at the mercy of the greater world," said Trish Costello, general partner of Portfolia Funds. "We're really in uncertain times-the volatile political climate, a potential trade war with China, a possible recession-that could weaken the IPO marketplace," she said.
And, remember, 2019 is a year in which so-called decacorns Uber, Airbnb, and Lyft could go public, with expectations of ranking among the 10 largest U.S. venture-backed tech IPOs since 2012, according to CB Insights.
Such is the unpredictability and frayed nerves in the $377 billion U.S. consumer-electronics market as its biggest consumer show approaches.
This much is known, however: An estimated 180,000 people are expected to descend on Las Vegas this week to help set the agenda for artificial intelligence, 5G networks, virtual reality/augmented reality, self-driving cars, digital heath, Internet of Things, and other technology in 2019. Some 4,500 exhibitors-1,100 of them startups-will occupy 2.8 million square feet across much of the city. Keynote speakers include LG Electronics (South Korea: 066570) President I.P. Park, International Business Machines (IBM) CEO Ginni Rometty, Verizon Communications (VZ) CEO Hans Vestberg, and Advanced Micro Devices (AMD) CEO Lisa Su.
Panasonic (Japan: 6752) has dramatically transitioned its business model to business-to-business and government contracts but will showcase technology platforms at CES for leading-edge applications in A.I., IoT, VR, and 5G. "CES is a consumer show whose changing program appeals to business partners and VCs (venture capitalists)," Panasonic Chief Marketing Officer Lauren Sallata said.
It sounds overwhelming, and it is. The kaleidoscope of technology at CES, and its impact on consumers and corporations, reflects a digital transformation in nearly every industry in America over the past five years, said Karen Chupka, CES executive vice president.
Health care, an industry heavily touched by tech, will be showcased during a two-day conference at CES. Mike Feibus, principal analyst at market research firm FeibusTech, anticipates new sleep-monitoring and sleep-enhancement products, connected devices to help keep the elderly healthier and living at home longer, and voice-activated devices. He cited Philips Electronics, Fitbit (FIT), and GreatCall, which was acquired by Best Buy (BBY) for $800 million in August, as vendors to watch.
In Vegas, CES is inescapable. Nearly every major hotel is host to an exhibit/event of some kind, and product demos spill out to specially designed parking lots for driverless vehicles.
Among the highlighted technology along the Strip:
CES is considered one of the best auto shows in the world, rivaling Detroit's historic North American International Auto Show. Ford (F), BMW (Germany: BMW), Kia (South Korea: 000270), Toyota (Japan: 7203), and Nissan Motor (Japan: 7201) are among the 11 automakers exhibiting in Las Vegas.
Self-driving demonstrations from Aptiv (APTV), IPO candidate Lyft, and other autonomous car developers will start from a designated parking lot near the main convention center to take passengers for a spin around town.
Dr. Peter Vaughan Schmidt, head of strategy for Daimler Trucks, says CES offers a "big commercial" opportunity to demonstrate the potential for autonomous trucks, as well as meet startups and recruit high-tech talent.
The ultra-fast service is slowly gaining traction in the U.S. In mid-December, AT&T (T) launched its 5G network in a dozen cities across the country. It "will be top of mind" at CES because it is the technology engine for autonomous vehicles and IoT devices, Kevin Westcott, a principal at Deloitte, said.
For now, sales of 5G-powered devices are modest. Deloitte predicts 1 million unit shipments in 2019, a sliver of a projected 1.5 billion total smartphones sold next year.
Consumers could get long-awaited new features to upgrade their smartphones, in the form of thin, foldable displays or A.I. chips, said Jeff Loucks, an executive director at Deloitte.
In 2018, just 56% of consumers bought a new smartphone within 18 months. In 2016, the rate was 69%, according to Deloitte.
Samsung Electronics (South Korea: 005930) could be among the first major companies to release a foldable model as early as CES, but it is more likely to wait for the Mobile World Congress show in Barcelona in late February. Last year, for example, Samsung focused on the Internet of Things and its vast array of interconnected devices for home appliances, TVs, and car dashboards.
A.I. chips could lead to a new wave of smartphone apps that improve facial recognition, natural language processing, and cameras on smartphones, Loucks said.
It might be enough to jump-start smartphone shipments after a rough 2018.
A jittery, anxious tech industry awaits some good news in 2019.
Write to Jon Swartz at jonathan.swartz@barrons.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
