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Meta sinks 7% and chip stocks crash as Wall Street asks who will pay for AI
Meta's first cash-flow deficit as a listed company and higher spending plans set off a broad sell-off in chipmakers on Thursday. Lam Research, CoreWeave and SpaceX were among the hardest hit.
Key points
- Meta shares fell 6.98% to $648.85 after it raised its 2026 spending forecast.
- The Philadelphia Semiconductor Index dropped 6.7%, with Lam Research down about 9%.
- Meta posted negative free cash flow of $2.12 billion, its first since listing.
Meta Platforms lost more than $100 billion in market value on Thursday and dragged the whole chip sector down with it, as investors balked at the scale of spending on artificial intelligence and asked how it will be paid for.
Meta’s shares fell 6.98% to $648.85, a day after its third-quarter results. Revenue beat forecasts, but the company raised its 2026 capital spending forecast to $135 billion to $145 billion, lifting the bottom of the range from $130 billion. Its longer-term spending commitments have climbed to about $825 billion from about $700 billion in July. Free cash flow came in at minus $2.12 billion, the first deficit since the company listed, and Meta announced a new class of non-voting shares to help fund the build-out along with a two-for-one stock split.
The chipmakers fall hardest
The selling spread quickly to the companies that supply the AI boom. The Philadelphia Semiconductor Index fell 6.7%. Lam Research dropped about 9% after its own results, Applied Materials and KLA about 6%, Micron 6.3% and Nvidia 4.4%. CoreWeave, which rents out AI computing power, slid about 10% on worries over its debt and cost of capital, a concern sharpened by Nvidia chief executive Jensen Huang’s remark that scarce capital was holding back such providers.
SpaceX fell 9.1%, giving back more than half of the jump that followed its first quarterly profit. Tesla lost 3.08% to $374.58 even though adjusted earnings of 48 cents a share beat forecasts; investors weighed lower capital spending this year against heavier outlays planned for 2027 and 2028 on its Optimus robot, Cybercab and chip projects.
Who pays
“The problem is how everyone can finance it all at the same time,” said Michael Antonelli, market strategist at Baird Private Wealth Management. IBM’s chief executive, Arvind Krishna, whose company also reported on Wednesday, said customers “are also getting worried if some of the AI spending is completely out of control with no real return”.
Not everyone was gloomy. Bank of America raised its Meta price target to $845, saying its “AI story continues to improve”. Matt Miskin of Manulife John Hancock Investments summed up why one company’s numbers moved the whole market: “Every index on the planet is basically an AI index.”
Why it matters for India
The fall sets a weak tone for Indian technology shares, which already face the overnight Nasdaq slide and Infosys’s results on Friday. Indian IT companies count US technology firms among their biggest clients, and any cut in their budgets beyond AI hardware is watched closely in Bengaluru and Pune.