Intel, Alphabet, Meta offering buyers sink underwater

Investors who bought into recent large stock offerings from Intel ↘ 3.12%, Alphabet ↗ 1.64% and Meta Platforms ↗ 0.24% were left holding shares worth less than they paid after all three stocks fell in early New York trading on Friday, October 30. Bloomberg reported that a run of disappointing earnings pushed the companies' shares below the prices paid by participants in their offerings. The selloff began with Alphabet's Wednesday report, which showed search and other ad sales missing estimates. It continued after Intel disclosed supply-chain problems with data center components. Both reports added to doubts about whether the heavy spending on artificial intelligence can last.bloomberg.com

Intel and Alphabet buyers underwater

Intel sold 210.5 million shares at $95 each in August, raising about $20 billion, according to its prospectus. Its stock was on track for its worst day on record Friday, falling about 29%, Reuters reported. The chipmaker gave a weak fourth-quarter forecast and said a deadly explosion at its Israel plant would cost about $600 million in revenue over two quarters, according to Reuters. Data center and AI revenue rose 78% to $7.3 billion, but PC chip revenue fell, CNBC reported.reuters.com+3

Alphabet shares fell more than 13% on Thursday, erasing over $500 billion in market value, its largest drop ever, after search and advertising sales came in below forecasts, Bloomberg reported. An analysis by FourWeekMBA put the combined paper loss for buyers in Intel's August sale and Alphabet's June raise at about $11.8 billion as of Friday morning. Alphabet's raise included a $10 billion private placement with Berkshire Hathaway ↗ 1.62%. By that estimate, Intel buyers were down about 30% and Alphabet buyers about 20%.fourweekmba.com+1

Meta hovers near its $625 price

Meta priced 40 million Class A shares at $625 on October 26, raising $25 billion. It also sold $12.5 billion of mandatory convertible preferred stock as part of a plan to raise as much as $97.5 billion for AI spending, according to Bloomberg Tax. The common stock drew about five times as many orders as there were shares available. Meta's stock slipped below the offering price early Friday, then climbed back close to $625 later in the morning, the FourWeekMBA analysis found.news.bloombergtax.com+1

Funding AI with stock

The losses show the risk of a new approach to paying for the AI buildout, in which Big Tech sells new stock instead of relying only on cash flow or debt, Yahoo Finance noted. Analysts remain doubtful about Intel. Bank of America ↗ 0.22% analyst Vivek Arya told clients that Intel's data center chips "are not yet technically competitive against AMD/ARM-based rivals that are growing 2x-4x faster," The Oregonian reported.oregonlive.com+1