Concerns about financing the AI boom overshadowed strong earnings on Wall Street last week. An early rebound in AI-related names stalled Thursday after Meta's disclosures, while the Dow gained 0.4% for the week and the S&P 500 and Nasdaq slipped.
Wall Street struggled to find its footing last week as renewed concerns about financing the artificial intelligence boom overshadowed strong earnings. An early rebound in AI-related names hit a wall Thursday after Meta Platforms reported negative free cash flow for the first time since its 2012 initial public offering. The sell-off spread to more defensive areas of the market on Friday.
Dow gains while Nasdaq and S&P 500 slip
The Dow Jones Industrial Average rose 0.4% for the week, even as it fell more than 1% on Friday when oil prices surged on fears of renewed U.S. strikes against Iran. The S&P 500 was down 0.5%, while the Nasdaq slipped 0.7%.
On Friday, the Nasdaq only posted a slight loss as investors returned to beaten-down chip stocks and bought up cyber stocks.
Meta's funding warning hits shares
Meta delivered a strong third quarter on Wednesday evening, but worries about negative free cash flow and its AI spending needs upstaged strong guidance. Its shares dropped 7% on Thursday and lost more than 9% on the week.
A regulatory filing raised the concerns. Meta warned that its long-term plans could require raising hundreds of billions of dollars over a period of several years beginning as early as fall 2026. The filing also detailed a plan to create a new class of non-voting stock, Class C, in January. The new share class would basically facilitate a two-for-one stock split.
Other AI-linked names react
CoreWeave, which has become a focal point for concerns about debt-fueled AI spending, fell 10% Thursday as investors scrutinized its borrowing costs. Nvidia was down roughly 1.5% last week.
Nvidia CEO Jensen Huang acknowledged the funding challenge on Thursday, saying the "demand of the capital is much greater than the availability of the capital."
Defensive holdings benefited from the rotation. Kimberly-Clark jumped 4.3%, Home Depot rose 3.3% and Johnson & Johnson gained 3.2%.
Source: CNBC
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