Microsoft executive says the economic environment is 'arguably the most uncertain we've seen in decades'

I met one of my best sources at the bar of the Palace Hotel at the end of the first day of the Goldman Sachs Communacopia + Technology Conference.

A veteran tech investor sips an Old Fashioned.

Tech stocks have been walloped by the stock market, which he likes to back. Tech M&A will be difficult, and the IPO market is probably not going to recover until well into 2023, according to the investor. Goldman is cutting hundreds of jobs, which caused an extra soupcon of gloom.

The conference was heaving with attendees and one Goldman bankers noted that this was the busiest version of the event ever. Tech executives shared gloomy outlooks, but no one freaked out and some were optimistic about the future.

One of the best indicators to watch is the chipmakers and their customers. Businesses that sell chips are among the first to feel the effects of demand waning.

The message they shared this week was "Welcome to the strangest economic downturn in recent memory". People are expecting more pain because interest rates are going up and inflation is still high. The tech industry continues with some strength.

The investor said that everyone is waiting for the wheels to come off but they are still turning. The person asked that they not be identified.

A "rather abrupt deceleration of demand"

During a Monday afternoon conference presentation, Chuck Whitten, co-COO of Dell, shared a similar mix of caution and calm.

The fiscal second quarter saw a "rather abrupt deceleration of demand" for laptops and other PC gear. Fewer new computers are needed by commercial customers who are more cautious about hiring. Dell expected the quarter to be challenging but it was quicker than expected.

Smaller firms have slowed more than larger ones during an economic downturn.

We don't know what to think of that. "Applying strategies from prior recessions may not work because the current economic situation is so different."

Dell's ISG division, which sells server and data storage to big cloud companies and other corporate customers, is performing better than theCSG unit Dell doesn't see any increase in order cancellation, and it feels good about its server orders. Whitten said that the world isn't meeting the demand for cloud customers.

Marvell executives were also confident about demand for their chips.

A "very difficult environment"

Tech companies weren't as optimistic. The economic environment is the most uncertain we've seen in decades according to a Microsoft executive.

Western Digital's executives described a very difficult environment during their conference talk.

Western Digital CEO David Goeckeler said that the industry is contracting at a rate it hasn't seen in a long time. The company will probably delay the start of its next factory due to the worsening pricing.

An employee from another company who was not authorized to speak to the press said he was not surprised by the comments from Western Digital executives. He said that the market for NAND is worse than the market for memory chips. There are only three main players in the DRAM industry and the bottom-cycle profit margins are higher than in the NAND industry.

The low-end of the smartphone mass-market is where the weaker consumer demand is coming from.

He expects that weakness to spread over the next two quarters. At some point in the future, we get back to normal, but there is weakness related to the consumer.

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