Steep bill for AI buildout punishes Meta, other tech favorites
META•Meta shares fell 8% after the company said it would issue a new class of shares to help fund AI spending and raised the low end of its annual spending forecast to $135 billion. AI-linked stocks also dropped as investors focused on rising costs and uncertain returns.
1. AI shares retreat
Meta shares fell 8% on Thursday, their largest decline since July, after the company said it would issue a new class of shares to help fund AI spending and other priorities. SpaceX dropped 9%, Nvidia fell 4%, and Lam Research slid 10% after its results; the Nasdaq was on track for its largest decline in four months.
2. Spending and cash flow
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 about how companies will fund AI infrastructure and how long it may take for the spending to generate returns.
3. Wider market concerns
The selloff extended to smaller AI infrastructure companies: Nebius fell 7% after announcing a $3.5 billion credit line from Citigroup, while CoreWeave dropped 9%. Treasury prices rallied as selling reflected concerns that a pullback in AI investment could weigh on US growth.
