AI summary
Summary of article:
Meta’s surge in AI capital spending created market skepticism about financing and returns, leading to a decline in chip stocks and technology stocks and funds turning to public bonds as a safe haven. However, some defensive stocks and excellent financial reports of individual stocks still bucked the trend and rose.
On the 22nd, US chip stocks sold off, the Philadelphia Semiconductor Index fell 6.7%, the largest one-day decline since June 23. intel,super micro (AMD), SanDisk and Marvell all fell more than 8%. meta overweightAye The spending plan once again created market doubts about the huge investment and financing requirements, causing the Nasdaq index to fall 2.6%, and funds turned to government bonds as a safe haven.
The Dow Jones Industrial Average rose 11.89 points to close at 52,867.98, an increase of 0.02%; The S&P 500 index fell 93.74 points to close at 7,663.43, a decrease of 1.2%; The Nasdaq Composite Index fell 694 points to 26,008.86, a decline of 2.6%, the biggest one-day decline since June.
The Philadelphia Semiconductor Index fell 6.7%, down more than 26% from its historic closing high on June 22, but it is still up 51.5% this year, outpacing the S&P 500’s 11.9% rise over the same period. TSMC ADRs fell 4.5%, less than half the decline.
Chip stocks also fell after earnings report failed to avoid selling pressure
Chip manufacturing equipment company Lam Research fell 11.8%. Although revenue and adjusted profits were better than analysts’ estimates, the share price still fell sharply, indicating that the market has high expectations for AI-related companies.
In addition to Intel, AMD, SanDisk and Marvell, which fell more than 8%, Huida, Micron, SpaceX and CoreWave also fell, and the AI supply chain generally suffered a selloff.
Huida CEO Huang Renxun said the industry lacks sufficient funds to support the development of new cloud players and the market’s concerns about AI financing run deep. This type of company provides digital infrastructure and services hyperscale data center companies like Meta and Amazon.
Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvester, said investors are beginning to see flaws in the AI growth theme and are being weighed down by the high weighting of technology stocks in major indices.
James McCann of Edward Jones pointed out that after the previous surge in technology stocks, investors are now demanding that companies provide evidence of returns on AI investments, and are also concerned about whether interest rates will remain high and whether the huge spending can be sustained.
Meta’s increased spending fell 7%, Tesla’s investment reduction also ended in the red
Meta fell 7%. The company’s third-quarter revenue hit a new high, but it also revealed billions of dollars in future spending commitments and plans to add a new class of non-voting shares to raise money for AI investments. The company experienced net cash outflow for the first time in more than a decade due to heavy AI spending.
“It all comes back to meta,” said investor and analyst Louis Navellier. He believes the market is now selling off other stocks, which is like “throwing out the baby with the bathwater.”
Tesla fell 3.1%. The company’s free cash flow was unexpectedly positive last quarter, but it cut its full-year capital spending forecast to about $20 billion from $25 billion previously. Musk did not further discuss the idea of merging with SpaceX during the analyst call.
Alphabet, Microsoft and Amazon, which will release their financial reports next week, have also invested heavily in data center construction, and the scale of expenditures and returns on investment will be tested.
However, Blackstone Chairman John Gray doesn’t believe the AI craze will turn into a bubble. He said the bubble is to first build production capacity and then hope demand emerges; On the other hand, AI is expanding production capacity and worrying about not being able to meet demand. This contrasts with hedge fund tycoon Griffin’s recent view that the AI industry is “almost certainly” headed for a bubble.
