Nasdaq steadies after Meta share plan sparks AI rout

The Nasdaq Composite fell 2.6% on Thursday, October 22, its worst session since early June. Meta Platforms ↘ 1.88% set off the selloff with a plan to issue non-voting stock to help pay for its artificial intelligence ambitions, Reuters Thomson Reuters Corporation ↘ 0.89% reported. The plan renewed doubts about whether tech companies can raise enough money to fund the AI buildout. The S&P 500 ↗ 0.71% lost 1.2%, while the Dow Jones Industrial Average ended roughly flat as investors moved into defensive stocks and bonds.marketscreener.com

Meta's cash crunch

Meta's third-quarter revenue beat expectations, but the stock fell about 7%. The company reported negative free cash flow of $2.12 billion, its first deficit since it went public, according to The Korea Herald. Meta also raised the low end of its 2026 capital spending forecast to a range of $135 billion to $145 billion. Its future spending commitments rose to $825 billion, up from about $700 billion in July, the Herald reported. According to CNBC Comcast Corporation ↘ 2.82%, Meta's SEC filing said it may need to raise "hundreds of billions of dollars" over several years and pointed to an "increasingly challenging environment for raising capital."biz.heraldcorp.com+1

"The worry around AI is no longer about the technology itself," Michael Antonelli of Baird Private Wealth Management told the Herald. "The question is how everyone can raise the money at the same time."biz.heraldcorp.com

Chips lead the rout

The Philadelphia SE Semiconductor Index PHLX Semiconductor Sector Index ↗ 2.82% dropped 6.7%, its largest one-day fall since June 23. It is now down about a quarter from its June record close. Nvidia ↗ 2.39% and Micron ↗ 2.98% fell, as did Alphabet ↘ 0.97% and Amazon Amazon.com, Inc. ↗ 0.44%.straitstimes.com+2

Nvidia CEO Jensen Huang added to the concern. Speaking to CNBC at Nvidia's GTC conference in Berlin, he said "there's a scarcity of capital" for neocloud providers and that "the demand of the capital is much greater than the availability of the capital," though he added, "That's going to get solved".cnbc.com

Bonds rally, oil jumps

The yield on the 10-year Treasury note fell 19.3 basis points to 4.953%, its biggest daily drop since March 2023. Bloomberg reported that money markets no longer fully price in another Federal Reserve rate hike this year. Brent crude rose 4% to settle at $113.17 a barrel, a five-month high, after Houthi attacks on Saudi Arabia.swissinfo.ch+1

The Nasdaq edged higher in midday trading on Friday as tech shares stabilized. Brent kept climbing, and the Dow fell. Analysts at Vital Knowledge wrote that the AI industry "has permanently entered a new era, one characterized by less hospitable capital markets."investing.com