Wall Street’s worries about the cost of artificial intelligence came back with force on Thursday. The Nasdaq fell as much as 2.6% in afternoon trading after Meta and Tesla reported earnings, with Meta’s stock closing down about 7% and Tesla’s down about 3%, Yahoo Finance reported.
The selloff erased the gains from the day before, when strong results from SpaceX and Super Micro Computer had lifted AI stocks.
Meta: a beat, then a selloff
Meta reported third-quarter revenue of $64.6 billion, up 26% from a year earlier and above analysts’ forecasts. Investors still sold the stock. One market recap noted that the company posted its first cash outflow in more than a decade, a sign of how fast its AI spending is growing. Meta’s advertising business remains profitable, but the cost of building data centers and chips is now squeezing the cash it has left.
Tesla: better earnings, smaller spending plan
Tesla beat expectations too, with adjusted earnings of 48 cents a share and positive free cash flow. But the company also cut its 2026 capital spending plan from more than $25 billion to about $20 billion. Shares fell about 5% before the opening bell and closed down 3.08%.
More pressure on chip stocks
Other news added to the pressure. Lam Research warned of supply chain constraints. CoreWeave, the AI cloud provider whose shares have already dropped sharply since May, got a downgrade. Nvidia and memory makers like Micron slid as well, and one recap said chip stocks closed at a three-month low. Oil prices surged again on fears of escalating tensions in the Middle East, and bond yields stayed high. We covered the latest oil-shipping risks in our report on the tanker attacks in the Strait of Hormuz.
Why the AI trade matters beyond tech
Tech stocks make up a large share of the main U.S. indexes, so a sharp drop in them pulls down retirement and savings accounts. The Federal Reserve chair has also described the AI spending boom as an economic shock, which we covered in our report on Warsh’s warning.
Earnings from Alphabet, Microsoft and Amazon arrive next week. They will show whether the biggest AI spenders are getting enough demand to justify the bills.
