Tech Stocks Slide on Meta’s Big AI Spending Plans: Markets Wrap
(Bloomberg) — Wall Street pumped the brakes on a stock rally as Meta Platforms Inc. sank 10% amid plans to take on debt to fund its artificial-intelligence push. Bonds stabilized after a rout driven by a Federal Reserve rate-cut pushback. The dollar rose.
While most shares in the S&P 500 actually climbed, a slide in several megacaps dragged down the gauge, which remains on track for its longest streak of monthly gains in four years. While the US and China agreed to a one-year trade truce, many investors saw the deal as mostly priced in.
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The latest developments gave some reasons for the equity surge to take a breather after multiple warnings about high valuations and a narrowing of participation in recent days that saw big techs significantly outperform other groups.
The AI trade is so essential to the bull market that any updates on spending and progress developing the technology could quickly sway traders one way or the other.
“None of this means that the AI bubble is going to burst and that we’re on the cusp of a major reversal in the stock market,” said Matt Maley at Miller Tabak. “However, it does raise the odds that we could see a short-term pullback.”
In a busy week for tech, Meta was said to set its public bond sale at $30 billion, after receiving $125 billion of orders. Microsoft Corp. slid on underwhelming results. Alphabet Inc. climbed on a sales beat. Apple Inc. and Amazon.com Inc. will report after the close.
The S&P 500 fell to around 6,865. A gauge of tech megacaps lost 2%. Nvidia Corp. slid 1.5% as President Donald Trump said he didn’t discuss approving sales of Blackwell chips to China with his counterpart Xi Jinping.
The yield on 10-year Treasuries rose one basis point to 4.09%. The dollar headed toward a three-month high. Bitcoin slumped.
The largest technology companies are betting on an AI future powered by gigantic data centers filled with humming servers. Now that the staggering cost of this push is coming into sharper focus, it’s testing nerves on Wall Street.
Three bellwethers from different corners of the technology world – Alphabet, Meta and Microsoft — together racked up some $78 billion in capital expenditures last quarter. That’s up 89% from a year earlier.
“The only takeaway that investors care about from big tech earnings is evidence of which company can stay in the AI race the longest,” said David Trainer at New Constructs. “None of these companies can keep up this huge spending on AI forever, and so those that find a way to profit first and the most from AI will be the winners.”
While more than “enough good news” is priced into stocks thanks to AI excitement, Trainer expects a pullback on the horizon.
“We maintain our conviction that AI-related stocks should drive further equity performance and believe that under-allocated investors should add exposure to the theme through a diversified approach,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
On the trade front, Trump and Xi agreed to extend a tariff truce, roll back export controls and reduce other trade barriers in a landmark summit on Thursday, potentially stabilizing relations between the world’s biggest economies after months of turmoil.
The outcome is poised to resolve — at least for now — months of trade brinkmanship in which the US and China threatened a series of levies and export controls on their products that had the potential to disrupt global supply chains and hurt the world economy. Still, it falls short of a comprehensive agreement that addresses issues at the heart of the US-China economic competition.
“The much anticipated US-China trade agreement showed both sides willing to step away from recent escalations, but not willing to stand down from a longer-term competition,” said Paul Christopher at Wells Fargo Investment Institute.
He views the deal as lowering tariffs just enough to help China stay competitive with other Asian countries in manufacturing trade. While the US gets a reprieve on China’s block against rare-earth metals and US soybean imports.
“Probably the most important part of the deal is that the US backs away from additional technology restrictions on Chinese tech companies,” Christopher said. “The deal puts pressure on US tech companies to stay ahead of Chinese competitors and on US policy makers to continue the search for alternative rare-earth metals suppliers.”
Markets had largely anticipated the US-China deal, which explains the relatively muted reaction, according to Fawad Razaqzada at Forex.com.
“Still, the easing of one of the major geopolitical uncertainties should be a welcome sign for risk assets,” he said. “Unless there’s a significant negative surprise from the remaining tech giants yet to report, equities could well have further room to climb.”
Sentiment has cooled slightly since equities hit record highs on the back of AI enthusiasm, he noted, but the downside limited for the time being.
Meantime, traders continued to digest Fed Chair Jerome Powell’s blunt warning that investors need to rein in expectations for a December rate cut – underscoring a growing tug-of-war among US policymakers who are opposed in their outlooks for jobs and inflation.
His comments came after officials voted 10-2 to lower the target range for the federal funds rate by a quarter percentage point on Wednesday. It was the second straight rate cut, but for the first time in six years, there were dissents in both directions — with one official advocating a larger reduction and another preferring to stay on hold.
“Why it was hawkish? Because the moderates are pushing back,” said Andrew Brenner at NatAlliance Securities. “So if the Fed does not go in December, the bar of employment gets raised and expect fewer cuts next year, no matter who the Chairman.”
“So, will there be more rate cuts ahead? Investors are left to read the tea leaves and listen to upcoming comments from Fed officials to determine whether rates will be reduced at the Fed’s next meeting in December,” said Chris Fasciano at Commonwealth Financial Network.
In the meantime, Fasciano believes corporate earnings continue to be a positive story for investors and should be supportive for markets moving forward.
Broadly speaking, S&P 500 third-quarter earnings continue to beat analyst expectation. This performance should cause full-year 2025 and 2026 estimates to tick higher, providing a solid fundamental backdrop for market participants, he noted.
“With uncertainty around Fed policy going forward and the ongoing government shutdown, there is the potential for volatility,” he said. “But companies across a large swath of the economy continue to report solid earnings. On top of that, we’ve seen good news on trade policy, particularly with China. These should provide decent tailwinds for investors.”
Corporate Highlights:
Mark Zuckerberg warned that Meta Platforms Inc. will need to spend even more aggressively on artificial intelligence in the year ahead, reigniting concerns from investors who sent its shares plunging on concerns that the massive investments won’t pay off. Microsoft Corp. is still suffering from a computing capacity crunch despite massive spending on data centers, a scenario that weighed on the company’s closely watched Azure cloud unit. Alphabet Inc. reported a surge in demand for its cloud and artificial intelligence services last quarter, pleasing investors who sent its shares up even as the company said capital spending for the year would be higher than expected. Palantir Technologies Inc. sued two former senior artificial intelligence engineers, claiming they stole documents and information to help launch a “copycat” competitor, Percepta. Artificial-intelligence startup OpenAI is preparing to file for an initial public offering as soon as next year that could give the company a market capitalization of $1 trillion, Reuters reported Wednesday, citing unidentified sources. Mastercard Inc. reported third-quarter earnings that beat analysts’ estimates as consumer and corporate spending remained robust. Eli Lilly & Co. raised its full-year guidance as revenue from its blockbuster weight loss and diabetes drugs beat expectations in the third quarter and it began solidifying its lead over its biggest rival. Merck & Co. shaved the top end of its 2025 revenue guidance and failed to produce any standout sales beats for its medicines in the third quarter, adding to challenges the drugmaker is facing as it prepares for the loss of its star cancer drug Keytruda. Bristol Myers Squibb Co. raised its revenue outlook for the year after newer medicines outperformed expectations, easing pressure on its portfolio of aging blockbusters. Biogen Inc. cut its full-year profit guidance on higher costs from deals the company has been doing to offset the decline of its aging multiple sclerosis drugs. Estée Lauder Cos. reported profit that surpassed Wall Street’s expectations, a sign the cosmetics company’s turnaround efforts are starting to pay off despite rising costs. Core Scientific Inc. shareholders rejected a takeover bid by CoreWeave Inc. that proxy advisers said undervalued the data center company, ending a contentious monthslong saga. Comcast Corp. reported its 10th straight quarter of losses in broadband customers and said it doesn’t expect the trend to turn around in the near future. Kimberly-Clark Corp.’s third-quarter earnings beat Wall Street estimates, a sign shoppers may be starting to move past the economic uncertainty that hurt results earlier this year even as overall sentiment remains weak. Crocs Inc. warned that US consumers were increasingly cautious despite reporting better than expected earnings. Hershey Co. called out disappointing Halloween sales so far in the US, but still upped its annual outlook thanks to price hikes. Roblox Corp. shares fell after the company reported widening losses in the third-quarter as costs at the video-game company increased during a period of soaring user engagement. Chipotle Mexican Grill Inc. cut its outlook for a third time this year as diners pulled back from eating out, a fresh warning sign for consumer spending. Cigna Group’s pledge to upend the way medicine is priced spooked Wall Street after the company warned the move would hurt profits in the next two years. Altria Group Inc.’s pivot away from cigarettes stumbled in the third quarter as demand slowed for its smokeless products, pulling the company’s shares down in early trading. American International Group Inc. agreed to buy stakes in specialty insurer Convex Group and alternative asset manager Onex Corp. in transactions that total more than $2.7 billion. Cleveland-Cliffs Inc. named South Korean steelmaker Posco Holdings Inc. as its new strategic partner, identifying the firm behind a deal touted 10 days ago by the American steel producer. Shell Plc beat profit estimates and maintained share buybacks while paying down debt, showing its resilience to weaker oil prices. Societe Generale Chief Executive Officer Slawomir Krupa said he’ll reconsider the use of share buybacks if a potential new French tax takes effect. Stellantis NV said it expects one-time charges in the second half of the year as political, economic and regulatory pressures force the automaker into making strategic changes. Deutsche Lufthansa AG said it’s confident it can end the year with significantly higher operating profit despite “ongoing global uncertainties” as the German airline group benefits from lower fuel costs, higher cargo demand and the initial effect of cost cuts. Volkswagen AG warned it needs a sufficient supply of semiconductors to meet its financial targets this year, signaling that looming shortages of shortages of Nexperia chips could further burden a struggling car industry. Novo Nordisk A/S made an unsolicited bid for US biotech firm Metsera Inc., sparking a heated battle with Pfizer Inc. to get their hands on weight-loss treatments that both drugmakers want in order to regain lost ground in the booming market. Nissan Motor Co. expects a ¥275 billion ($1.8 billion) operating loss this year as the embattled carmaker pushes ahead with a cost-cutting spree to rescue its deteriorating financial position. BYD Co. reported another slump in quarterly profit as intensifying domestic competition and growing industry scrutiny pile pressure on the Chinese carmaker’s sales outlook. Cnooc Ltd.’s third-quarter profits took a hit from lower oil prices despite its efforts to maintain strong production growth. China Vanke Co. reported a deeper third-quarter loss, highlighting mounting challenges as the prolonged property market downturn continues to weigh on its sales. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.4% as of 2 p.m. New York time The Nasdaq 100 fell 0.8% The Dow Jones Industrial Average rose 0.3% The MSCI World Index fell 0.5% Bloomberg Magnificent 7 Total Return Index fell 2.1% The Russell 2000 Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1566 The British pound fell 0.3% to $1.3152 The Japanese yen fell 0.9% to 154.11 per dollar Cryptocurrencies
Bitcoin fell 3.6% to $107,427.62 Ether fell 4.7% to $3,768.32 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.09% Germany’s 10-year yield advanced two basis points to 2.64% Britain’s 10-year yield advanced three basis points to 4.42% The yield on 2-year Treasuries advanced one basis point to 3.61% The yield on 30-year Treasuries advanced two basis points to 4.64% Commodities
West Texas Intermediate crude rose 0.3% to $60.68 a barrel Spot gold rose 1.8% to $4,002.32 an ounce ©2025 Bloomberg L.P.
