Wall Street slumps as Meta’s AI spending unnerves investors

Stocks on Wall Street slumped as investors were unnerved by Meta Platforms’ record spending plans for artificial intelligence infrastructure, with the tech-heavy Nasdaq Composite on track for its worst day since June.

Oil prices were back on the rise after the US State Department ordered non-emergency personnel to leave Saudi Arabia amid a growing threat from Houthi militants, while Iran threatened to strike energy targets if the US renewed its attacks on the Islamic Republic.

European stock markets declined with luxury companies Kering and Prada warning of soft demand for high-end goods.

And Australian futures are pointing to a soft start to the trading day for the ASX, with no major data scheduled on this side of the Tasman.

Too much spending

Meta slumped 7.5% in late trading after the social media giant’s earnings beat analysts’ expectations, with investors wary of the company’s increased spending to support its AI build-out.

The selloff followed a soft session in Asia, where China’s CSI 300 index – a benchmark of the Shanghai and Shenzhen exchanges – sank into bear market territory on Thursday.

The Nasdaq sank 2.8% in late trading and was on track for its worst day since June 5, while the S&P 500 dropped 1.5% and the Dow Jones Industrial Average declined 0.3%, with Caterpillar, Amazon and Nvidia leading the blue-chip index lower.

“Following a strong rally in technology stocks, investors are demanding clearer evidence of returns on AI investment and questioning whether the scale of spending can be sustained,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Meta Platforms’ projection of billions of dollars in additional future spending commitments added to investor concerns.”

Tesla dipped after it pared back its capital expenditure programme for the coming year, while Elon Musk declined to comment further on a potential merger with SpaceX.

Lam Research sank 11% even as it beat analysts’ earnings estimates, and International Business Machines dipped as its consulting revenue missed expectations.

The Financial Times reported US Treasury secretary Scott Bessent said he didn’t see a systemic problem in the AI boom, telling a charity dinner that it was different from the dot-com boom and bust of the early 2000s.

AI safety research group METR said a review of OpenAI’s internal monitoring systems found several new vulnerabilities. The ChatGPT developer said those have since been patched.

And Bloomberg reported China’s DeepSeek raised about 100 billion yuan in its latest fundraising round as it accelerates its push to compete more aggressively with the likes of OpenAI and Anthropic.

Continental issues

European stock markets were also weaker, with the UK’s FTSE 100 down 0.3%, while Germany’s DAX dropped 1.1% and France’s CAC 40 declined 1.4%.

Luxury companies Kering and Prada both acknowledged soft demand for their high-end products in reporting their respective quarterly earnings, while beauty giant L’Oréal beat expectations.

French government bond yields hit a new multiyear high and were up 8 basis points at 5.08% at 7am in Auckland, amid ongoing concern about the widespread unrest in the continent’s second-biggest economy and the ability of its government to balance its books. The kiwi dollar traded at 50.66 euro cents at 7am from 50.59 cents yesterday.

Brent crude oil futures rose 3.8% to US$112.96 a barrel, adding to the general unease among investors. Energy prices climbed as the US State Department told non-emergency staff to pull out of Saudi Arabia, where Houthi attacks have stepped up.

Separately, Iran threatened to target energy infrastructure if the US and Israel renewed their attacks on the Islamic Republic, amid a New York Times report that US President Donald Trump and Israeli prime minister Benjamin Netanyahu had agreed in-principle to renew their strikes after the midterm elections.

Meanwhile, the Wall Street Journal reported Trump asked Elon Musk to lift Starlink restrictions on military-grade technology for Ukraine.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index, with the benchmark on track to snap three weeks of gains. New Zealand’s S&P/NZX 50 index is down 0.1% so far this week.

The kiwi dollar traded at 56.87 US cents at 7am from 56.89 cents yesterday.

No local data are scheduled for today. Winton Land holds a virtual annual meeting today.

Reporting by Paul McBeth. Image from Shutter Speed on Unsplash.