In recent days, the US market has seen a notable slide in the shares of its largest firms. The downturn has touched the gaming sector and makers of computer hardware. It even reached a moment where the head of Intel echoed biblical verses on social media. This article explains what happened in the global market and what it could mean for everyday people.
On crises in the global economy
The Scottish economist Adam Smith, writing in the 18th century, argued that crises are an inherent part of capitalist systems. Economic expansion eventually pauses, and a recovery period follows. A vivid example is the financial crisis of 2008, whose aftershocks persisted until 2013. Similar episodes have occurred before and will reappear in the future. Even when the economy regains its previous level, many firms shutter, workers lose jobs, and plans fall apart. Those with loans or financial obligations often bear the heaviest burden.
New “Black Monday.” What happened on August 5, 2024
The warning signs of a fresh downturn have been evident for some time. News of downsizing in game studios and the consolidation of publishers has been reported. After the AI boom and the post-pandemic rebound, the economy entered a phase of technological turbulence, a telltale sign of looming trouble.
On August 5, currency markets tumbled. The fall began in Japan, where the Nikkei 225 dropped 12.4 percent. Markets elsewhere followed suit. The United States saw declines in major indices, with S&P 500, Dow Jones, and NASDAQ Composite all retreating, though by roughly 3 percent. The Moscow Exchange also posted a decline, around 2.42 percent.
Many experts caution that it is premature to declare the US economy in a free fall. The Federal Reserve is anticipated to cut interest rates in September, a move that could lend support to markets. For now, investor worry appears driven more by sentiment than by objective indicators. As this article is written, markets had already regained some ground by the morning of August 6.
Why are gaming company and hardware maker stocks falling?
The most pronounced distress is at Intel, a company known for its processors. Since the start of the year, its share price has sunk by about 57 percent, with a sharp drop occurring between August 1 and 2. This may be only the lead edge of a broader trend worsened by currency-market dynamics.
The decline is linked to a mix of challenges, including concerns about processor quality, a pause in dividend payments, reorganizations across multiple units, and a 15 percent workforce reduction.
What brand of processor is installed in your computer?
On the evening of August 4, Intel’s chief executive Pat Gelsinger offered a biblical quote rather than a straightforward update. In Russian, the passage reads: “Let your eyes look straight and your eyelashes be straight toward you. Consider the path for your feet, and let all your ways be sure.” Some readers viewed the remark as a sign of strain, while others saw it as an ill-timed gesture. The response from readers echoed a sense of resignation, reminiscent of Dante’s line on the gates of hell in the Divine Comedy.
A similar pattern emerged at Ubisoft. Announcements for Star Wars Outlaws and Assassin’s Creed: Shadows did not lift share prices; they fell. Journalists praised upcoming titles, but ordinary players remained skeptical, as they are the ones who spend on new releases. Notably, moving the setting of the next Assassin’s Creed to Japan aimed at expanding the market, yet Japanese players criticized the project for perceived historical inaccuracies.
The August downturn pushed Ubisoft’s market capitalization to its lowest point of the year. In January 2024 the stock traded at around 30 euros, but by August it hovered near 16.93 euros after a further 10 percent drop following August 5.
Japanese companies also felt the impact. Official data show Nintendo down about 15 percent, Sony about 6 percent, Capcom 16 percent, Sega 13 percent, Konami 8 percent, and Square Enix 5 percent.
Yet if Intel and Ubisoft experience a persistent slide, something similar could unfold for the broader market. By contrast, Sony’s shares, which showed signs of stability, even rose above levels seen in May 2024 after earlier declines. NVIDIA also illustrates this contrast: despite a strong year of growth, its stock fell roughly 10 percent in early August, a dip viewed against a backdrop of substantial gains earlier in the year.
What impact will falling stock prices have on the future?
If the downturn persists, companies may need to take drastic measures. Widespread layoffs, division closures, and reduced production could follow. That would likely slow the pace of new game releases and put upward pressure on hardware prices as supply strains persist.
On the flip side, a quick rebound would dampen the effects for everyday users. History shows that markets can be volatile, yet a resilient sector can recover. From 2020 to 2023, CD Projekt RED’s stock moved with external events, yet the company endured and continued development on Cyberpunk 2077 and other titles. If the August crisis proves short-lived, a similar pattern could emerge for the companies most affected.
What are your thoughts on the decline in gaming stocks and the broader market shifts? Share your perspective in the comments.
How serious do you think the August 2024 crisis will be?
Source: VG Times