Meta falls as AI spending costs weigh on technology stocks
Meta and other AI-linked stocks fell during Thursday trading as investors weighed the cost of building AI infrastructure and how companies will fund it.
Meta shares fell 8% during trading in New York on Thursday, October 22, as investors sold companies tied to the AI buildout amid concern about the cost of funding it, Reuters reported. The decline came a day after Meta said it would introduce non-voting shares that could help pay for AI spending and other priorities.
Nvidia fell 4%, while chip-equipment maker Lam Research dropped 10% following its results, Reuters reported. The Nasdaq Composite was on track for its largest decline in four months at the time of the report; that was an intraday assessment, not a closing result.
Why Meta’s share plan matters to investors
Meta said Wednesday it would use a new class of shares, called Class C, that carries no voting power. Semafor reported that issuing such stock could help Meta pay for chips, acquisitions and AI talent without reducing Mark Zuckerberg’s voting control. The plan gives Meta another way to raise funds, but new share sales would increase the number of shares outstanding.
Reuters reported that Meta raised the low end of its annual spending forecast from $130 billion to $135 billion, leaving the high end at $145 billion. The company reported third-quarter free cash flow of negative $2.12 billion, compared with positive $10.63 billion a year earlier. Those figures put the financing question in sharper focus for investors assessing when AI investment might produce returns.
Matthew Maley, chief market strategist at Miller Tabak, told Reuters that the selling reflected questions about returns on the spending. He said it was becoming clearer to investors that those returns would take longer to arrive. Great Hill Capital chairman Thomas Hayes also pointed to reported remarks by Nvidia chief executive Jensen Huang about a financing bottleneck for smaller AI companies, according to Reuters.
Pressure on companies funding AI infrastructure
The pressure extended to companies building AI capacity. Nebius fell 7% after announcing a $3.5 billion credit line from Citigroup, while CoreWeave fell 9%, Reuters reported. The news agency said yields on CoreWeave’s unsecured bonds had risen to 15% during the previous week’s AI selloff, an indication of the financing costs facing some companies.
Bank of America analyst Tal Liani maintained a buy rating and a $140 price target for CoreWeave ahead of its earnings report next month, Reuters reported. He estimated that the company would need to raise $20 billion to fund commitments to customers. That estimate is his assessment of future financing needs, rather than an announced fundraising plan.
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Sources and context
- Steep bill for AI buildout punishes Meta, other tech favoritesReuters, republished by Channel NewsAsia
- Meta plans nonvoting shares, eyeing more stock sales to fund its AI dreamsSemafor
AI-assisted article checked against the listed sources. NewsJaws did not conduct interviews or attend the reported events.
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