Intel stock fell 8.1% on Thursday as oil prices climbed and worries about AI spending weighed on chip stocks. Meta's Q3 report, which showed negative free cash flow, did not help calm the market.
Intel stock fell 8.1% on Thursday, Oct. 22, as rising oil prices and concerns about AI spending dragged on chip stocks. Brent crude topped $112 a barrel following attacks in Saudi Arabia.
The broader market fell too. The S&P 500 and the Nasdaq Composite dropped 1.2% and 2.6%, respectively.
Expensive oil complicates the outlook for chips
The renewed threat to Middle East energy supplies is once again weighing on the AI trade. It is fueling concerns that inflation and borrowing costs will remain higher for longer.
U.S. Treasury yields fell Thursday, largely due to political unrest in Europe, but they remain well above their level before the war began. The Motley Fool article says this is the problem for the AI industry: the data center build-out requires enormous amounts of money, and financing it is getting more expensive.
As a seller of shovels in the AI gold rush, the article says, it needs customers to keep buying.
Meta's cash burn fuels AI funding concerns
Meta Platforms did not help calm the market. In its Q3 earnings report, the company said it would likely spend even more than planned on capex by the end of its fiscal year.
It also reported negative free cash flow for the first time since 2012. Free cash flow is the money left after operating expenses and capital spending.
Meta also approved a non-voting stock class that it can use to raise capital without diluting CEO Mark Zuckerberg's voting control. The article says the market took this as a signal that financing costs are making additional borrowing unattractive and the company might turn to equity sales.
Source: The Motley Fool
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