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Steep bill for AI buildout punishes Meta, other tech favorites

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Steep bill for AI buildout punishes Meta, other tech favorites

Business News Tech AI Steep bill for AI buildout punishes Meta, other tech favorites

Investors sold shares of Meta Platforms and a wealth of companies central to the AI trade, a day after Meta -- one of the so-called hyperscalers spending billions to build data centers and other infrastructure supporting the AI boom -- said it would issue a new class of shares that will help it raise funds.

The tab for the next round of the AI buildout came due on Thursday. Investors sold shares of Meta Platforms and a wealth of companies central to the AI trade, a day after Meta -- one of the so-called hyperscalers spending billions to build data centers and other infrastructure supporting the AI boom -- said it would issue a new class of shares that will help it raise funds. Meta fell 8%, its largest drop since July. SpaceX declined 9% and semiconductor giant Nvidia -- a bellwether of the AI trade -- dropped 4%. The Nasdaq Composite was on track for its largest decline in four months.

A 10% plunge in shares of semiconductor company Lam Research following its results also weighed on sentiment and sent the semiconductor index to its largest decline since July. The pullback is the latest test for the AI trade, focusing on the rising costs of a long-term project the payoffs from which remain uncertain and will likely be unevenly distributed. Tech firms have borrowed huge sums over the past year for AI spending, but Wall Street now expects that higher interest rates mean the likes of Meta will sell billions of dollars in stock to fund the next round of building - putting pressure on share prices by increasing the number of shares outstanding.


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