Key facts
- Meta Platforms shares fell 7% on Thursday.
- Nvidia dropped 4% and the Nasdaq composite lost 2.6%.
- Lam Research shares plunged 12% following its results.
- Meta Platforms reported negative free cash flow of $2.12 billion in the third quarter.
- Meta Platforms plans to issue new non-voting shares to fund AI spending.
Investors sold shares of Meta Platforms and other companies central to the AI trade on Thursday, concerned about the rising costs of long-term AI projects and the potential for dilution from stock sales to fund them. Meta fell 7%, its largest drop since July, after announcing it would issue a new class of non-voting shares to help fund AI spending and raising its annual spending forecast. Nvidia dropped 4%, Lam Research plunged 12% after its results, and the Nasdaq composite lost 2.6%. Analysts cited concerns about return on investment for AI spending and financing bottlenecks for smaller AI companies. Meta reported negative free cash flow of $2.12 billion in the third quarter, its first cash burn in over a decade. The sell-off also affected other AI-focused companies like Nebius and CoreWeave, with investors seeking safety in Treasury bonds.