Meta AI capital spending plans struck a raw nerve on Wall Street on Thursday. Shares of Meta fell 7%, erasing $124 billion from the company’s market value, as investors dumped stocks tied to the AI boom and piled into safer assets.
The tech-heavy Nasdaq composite dropped 2.6%, its worst day since June. The S&P 500 fell 1.2%, while the Dow Jones Industrial Average ticked up less than 0.1%. The PHLX semiconductor index, including Nvidia and Micron, fell 6.7%. The 10-year Treasury yield dropped below 5% in its biggest one-day fall since March 2023.
Meta AI capital spending plans grow
The Meta AI capital spending selloff started a day earlier. On Wednesday, Meta announced plans to create a new class of nonvoting stock to raise the capital it needs for developing and serving AI models. Initial excitement over the company’s record third-quarter revenue gave way to anxiety about how Meta and its peers will pay for the AI race.
Meta disclosed that its future spending commitments have risen to roughly $825 billion, up from nearly $700 billion in July, a jump driven by Meta AI capital spending. The company also reported that its free cash flow went negative for the first time since it became a public company. On a call with analysts and investors, Meta executives did not say how much they plan to spend on capital projects in 2027, but said they “expect to continue investing aggressively.”
A regulatory filing from Meta noted that recent large capital raises from peers like Alphabet and SpaceX, alongside expected fundraising from Anthropic and OpenAI, have created a tougher fundraising climate. The company said it would move early to raise funding before competitors absorb the market’s available capital. In short, Meta AI capital spending is growing faster than the market’s comfort with it.
Why Meta AI capital spending spooked investors
“The growing concern with AI isn’t about technology anymore,” said Michael Antonelli, a market strategist for Baird Private Wealth Management. “It’s ‘how can we all fund this at once?'”
That question about Meta AI capital spending now hangs over the whole sector. After hundreds of billions of dollars poured into data-center construction, investors are growing skeptical that user demand will generate returns to match. Tech giants like Amazon, Alphabet and Microsoft are taking on heavy debt to fund expanding capital spending, raising fears that rising borrowing costs will squeeze profit margins.
Meta AI capital spending is not the only source of nerves. Disappointing earnings from Tesla, whose adjusted net income slid, also unsettled an already jumpy market. Tesla shares fell 3.1%. Fresh tensions in the Middle East pushed oil prices to their highest levels since May. SpaceX, which reported a profitable quarter on Tuesday and said it might merge with Tesla, declined 9.1%.
Other stocks tied to the data-center buildout dropped sharply too, from hyperscalers like Alphabet and Amazon.com to cooling equipment maker Vertiv Holdings. CoreWeave, a newer AI cloud company that relies on debt to fund its infrastructure, was at the center of investor anxiety last week. Its bonds due in 2032 traded just under 80 cents on the dollar on Thursday, down from almost 90 cents last month but only slightly lower than Wednesday, according to MarketAxess.
“The financing constraint over just the last three to four months has become real,” said Jim Russo, a portfolio manager at AllianceBernstein. “It’s become a real headwind to growth as we move from 2026 into 2027,” especially for companies more dependent on outside financing.
Bonds rally as tech sells off
Stocks far from the AI trade, and from Meta AI capital spending worries, did well on Thursday. Consumer staples like Clorox rose 4.6%, and regional banks like M&T Bank climbed 1.5%. The bond rally was the day’s other big move. The yield on the 10-year Treasury note settled at 4.952%, according to Tradeweb, down from 5.145% on Wednesday.
Some analysts said the Treasury rally likely reflected investors rebalancing portfolios more than a change in their economic outlook. Still, a slowdown in tech company spending could have wider effects, potentially cooling inflation and slowing economic growth, both of which would support bonds by easing pressure on the Federal Reserve to raise interest rates.
This is not the first time Meta AI capital spending fears have driven investors out of AI stocks. Similar selloffs have flared whenever competition intensified, growth showed signs of slowing or data-center operators reported construction delays. More recently, high interest rates and geopolitical uncertainty have raised doubts about whether debt-heavy developers can keep expanding at the current pace.