Oil jumps to $116.72 as Nasdaq falls 2.6% on rising AI concerns
Key Facts
The Nasdaq fell 2.6% on Thursday, October 22, its biggest daily decline since early June, as concerns over technology companies’ AI spending resurfaced. Chip stocks retreated, while Meta shares fell 7% after the company reported third-quarter results that topped analysts’ expectations. Reuters said the company recorded its first cash outflow in more than a decade because of AI-related expenses. Its announcement of a non-voting share issuance also raised concerns about funding its growing capital commitments. Questions centered on the scale of upfront spending and how long it would take to generate returns.
The pressure on stocks spread to global markets on Thursday, while investors moved into U.S. Treasuries. But the yield rose Friday to 4.99% from 4.96% late Thursday, according to The Associated Press. The shift highlights the differing direction of bonds across the two sessions, alongside the decline in stocks in the first.
Oil extended its gains Friday, with Brent crude futures settling at $116.72 a barrel after rising 3.1%. The price was below $97 at the start of October, according to The Associated Press. The agency linked higher energy prices to a sharp decline in global supplies because of the U.S. war with Iran. Houthi attacks in Saudi Arabia also fueled concerns about further disruption to energy supplies from the Middle East. Reuters had reported that Brent settled at $113.17 a barrel Thursday, up 4%, following those attacks and supply concerns.
The developments leave investors facing two sources of concern at once: the cost of building AI infrastructure and energy risks. The Associated Press said investors are focused on “the large upfront costs needed to build AI infrastructure, and uncertainty about when those investments will pay off.” Meta’s decline Thursday reflects the market’s sensitivity to its funding and spending plans, even as its results topped analysts’ expectations. Rising oil adds pressure from supply disruption to the trading picture. The agency’s report did not give a separate figure for the global stock index’s performance at Thursday’s close.
Attention turns next week to results from Alphabet, Microsoft and Amazon, as investors watch whether heavy AI spending will translate into future growth. The U.S. personal consumption expenditures index was also expected to rise 3.7% year over year in September, compared with 3.4% in August, according to The Associated Press. The Federal Reserve targets inflation of 2%. The central bank was expected to conclude its two-day meeting Wednesday with its benchmark interest rate unchanged. Markets continued to price in another increase in December, the agency said.