Meta drops 6.98%, Lam Research tumbles 11.76% as markets scrutinize soaring capital expenditures and growth outlooks
Staples and healthcare rally to nudge Dow higher; 10-year Treasury yield falls beneath 5%
U.S. equities saw a heavy sell-off in artificial intelligence (AI) related shares on Wall Street, driving the Nasdaq index down by more than 2%. Meta’s latest earnings report reignited concerns over the funding burdens required to support massive capital investments, triggering a slide across semiconductor and data center infrastructure stocks. Conversely, gains in consumer staples, pharmaceuticals, and telecom shares helped the Dow Jones Industrial Average eke out a marginal gain.
On October 22 (local time), the Nasdaq Composite finished down 694.00 points, or 2.60%, at 26,008.86. The S&P 500 lost 93.74 points, or 1.21%, to close at 7,663.43, while the Dow Jones Industrial Average rose 11.89 points, or 0.02%, to end at 52,867.98. The Philadelphia Semiconductor Index plummeted 773.58 points, or 6.72%, settling at 10,731.98.
Meta shares dropped 6.98%. While the company reported third-quarter revenue of $64.6 billion—up 26% from the same period a year earlier—its capital expenditures outpaced cash generated from operations. Capital expenditures, including principal repayments on finance leases, came to $34.91 billion against operating cash flow of $32.79 billion, resulting in a free cash flow deficit of $2.12 billion.
Future capital requirements also drew sharp market scrutiny. Meta raised the lower end of its full-year capital expenditure forecast range from $130 billion to $135 billion while keeping the upper end at $145 billion. Furthermore, the company announced plans to introduce non-voting Class C shares in January, which could be utilized for funding purposes. These announcements, unveiled alongside revenue growth, heightened anxieties over the cash intensity of Meta's AI ventures.
Semiconductor equipment maker Lam Research slumped 11.76%. Although its revenue for the quarter ending in late September reached a record $8.22 billion, the midpoint of its next-quarter revenue guidance at $8.6 billion only slightly exceeded market expectations. The company cited near-term supply constraints that could delay certain equipment shipments and noted that revenue contributions from mainland Chinese clients are expected to decline.
Other semiconductor equipment suppliers and major chipmakers fell in tandem. KLA dropped 9.54% and Applied Materials slid 8.16%. AMD fell 8.10%, Intel lost 8.04%, and Micron Technology declined 6.26%. NVIDIA and Broadcom retreated 4.40% and 4.31%, respectively.
Stocks linked to AI infrastructure investments also faced broad weakness. Server maker Dell Technologies fell 6.78% and networking equipment provider Arista Networks lost 7.19%. Power equipment suppliers GE Vernova and Eaton declined 10.64% and 6.33%, respectively. CoreWeave, an AI cloud provider whose stock has seen heightened volatility due to borrowing pressures, dropped 10.1%.
Among mega-cap tech stocks, Amazon fell 4.57%, Alphabet Class A shares dropped 3.15%, and Microsoft lost 2.23%. Tesla declined 3.08%. Apple proved relatively resilient among major technology names, rising 1.23%.
In contrast, consumer staples and healthcare issues showed strength. Procter & Gamble (P&G) advanced 5.58%, while Walmart and Coca-Cola gained 2.82% and 2.87%, respectively. Johnson & Johnson rose 3.81% and Eli Lilly added 2.83%. Telecom operators Verizon and AT&T climbed 3.76% and 3.79%, respectively.
Roughly two-thirds of the constituents in the S&P 500 advanced during the session. Despite the breadth of the rally, heavy-weight technology stocks dragged the broader indices lower. P&G, Lockheed Martin, and railway operator CSX bolstered the market with earnings reports that beat expectations.
Rising oil prices driven by Middle East tensions also weighed on investor sentiment. According to Reuters, Brent crude futures settled up $4.35, or 4.0%, at $113.17 a barrel, as Houthi rebel attacks on Saudi Arabia heightened fears of crude supply disruptions.
U.S. Treasuries strengthened amid a flight to safety. The yield on the benchmark 10-year Treasury note fell below 5%. As the tech rout sapped risk appetite, demand for relatively safe government debt drove bond prices up and yields down.
