Steep bill for AI buildout punishes Meta and other tech favorites
META•Meta shares fell 7% after the company said it would issue non-voting Class C shares to help fund AI spending and raised the low end of its annual spending forecast to $135 billion from $130 billion. The Nasdaq fell 2.6% and the Philadelphia Semiconductor index dropped 6.7% as investors worried about rising AI costs and uncertain returns.
1. AI spending weighs on shares
Meta fell 7% on Thursday, its largest decline since July, after announcing plans to issue a new class of shares to help fund AI spending and other priorities. Nvidia fell 4%, Lam Research dropped 12% after reporting results, and the Nasdaq Composite lost 2.6%; the Philadelphia Semiconductor index fell 6.7%.
2. Funding and returns concerns
Meta raised the low end of its annual spending forecast to $135 billion from $130 billion, leaving the high end unchanged at $145 billion. It reported negative free cash flow of $2.12 billion in the third quarter, compared with positive free cash flow of $10.63 billion a year earlier, its first cash burn in more than a decade. Investors are concerned that the long-term projects will take longer to produce returns and that rising borrowing costs could encourage technology companies to sell stock to fund further construction.
3. Pressure reaches smaller firms
Nebius fell 7% after announcing a new $3.5 billion credit line from Citigroup, while CoreWeave declined 10%. Bank of America analyst Tal Liani said he maintained a buy rating and $140 price target on CoreWeave, but believes it will need to raise $20 billion to fund customer commitments. Investors also moved toward Treasury bonds as the selloff spread.
