Nasdaq falls 2.6% to 26,008.86 as Lam Research and Meta slide
Key Facts
The Nasdaq Composite ended Thursday, October 22, at 26,008.86, down 2.6%, as losses in technology and artificial intelligence stocks weighed on U.S. indexes. Lam Research fell 11.8%, while Meta declined 7%, in a session when investors punished signals related to earnings forecasts and investment financing. The S&P 500 also fell 1.2%, its worst daily performance since July, according to the Associated Press. By contrast, the Dow Jones Industrial Average rose 11.89 points to 52,867.98. Stock moves showed the selloff was narrower than the index losses suggested: about two-thirds of S&P 500 stocks rose, but declines in large technology companies outweighed their gains.
Lam Research fell even though the company's summer-quarter earnings and revenue slightly exceeded analysts' expectations. But the company gave a range for its current-quarter earnings forecast whose midpoint was slightly below analysts' estimates, weighing on the stock. Lam entered the session up 52.4% year to date, nearly four times the S&P 500's gain over the same period. Its chief executive said rising demand for semiconductors and device complexity were supporting the company's business. He added that its focus on operational execution had helped deliver record revenue, earnings and earnings per share, and said its investments in technology and manufacturing capacity were paying off.
Meta shares fell after its latest-quarter revenue topped analysts' expectations, while earnings came in below their estimates. The company announced the creation of a new class of shares to raise financing for artificial intelligence investments and other expenses. Reuters reported that the plan to issue non-voting shares revived concerns about the company's growing capital commitments, despite third-quarter revenue exceeding expectations. Pressure spread to other companies tied to AI infrastructure: Nvidia fell 4.4%, the single biggest drag on the S&P 500, according to the Associated Press. CoreWeave also fell 10.1% amid concerns over the company's debt after it borrowed to buy Nvidia chips and lease them to customers through cloud-computing services.
The Associated Press linked the decline in AI stocks to concerns over the cost of borrowing needed to build data centers and buy more chips, as well as worries about elevated valuations after a rally that had lasted for years. Strategist Angelo Kourkafas said investors were focusing more on AI economics, including the cost of upfront infrastructure and uncertainty over when returns would arrive. In the bond market, the yield on the 10-year U.S. Treasury fell to 4.97% from 5.13% late Wednesday, as investors moved into bonds during the stock market decline. On the other hand, Brent crude rose 4% to $113.17 a barrel after reaching a five-month high, amid uncertainty over how the war with Iran could affect the return of global energy supplies to normal. The AI stock selloff spread to Asia, where South Korea's Kospi fell 3.5%, Hong Kong's Hang Seng declined 3% and Japan's Nikkei 225 dropped 2.7%.
Market moves diverged in the next session, Friday, October 23, as the Nasdaq Composite fell 0.2% after giving up modest gains, while the S&P 500 declined 0.5% and the Dow Jones fell 1.2%. That day, Microsoft rose 0.7%, Micron gained 2.5%, and Intel and AMD each advanced 1.7%, despite the broader market decline. Lam Research closed at $230.1 and Meta at $642.62 in Friday's session, prices for the day after Thursday's decline. Investors are turning their attention to the Federal Open Market Committee meeting scheduled for October 27 and 28. The press conference is scheduled for October 28.