GE Vernova stock was getting hammered on Thursday. The reason is hard to suss out for sure. Meta Platforms probably deserves most of the blame.
Shares of the power generation equipment supplier were down 10.6% in midday trading at $828. There doesn't seem to be much GE Vernova-specific news, leaving investors scrambling for answers.
For starters, the market is weak. The S&P 500 was down 1%. Higher oil prices are part of the issue amid rising tension in the Middle East.
Artificial intelligence is the bigger issue. Meta Platforms stock was down almost 7% in midday trading after the company reported better-than-expected revenue, but capital spending topped $33 billion, up from less than $20 billion a year ago. Meta nudged up its guidance for annual capital spending to a midpoint of $140 billion from a midpoint of $137.5. It's also creating a new class of stock for capital raising to finance the AI buildout.
Accelerating spend isn't a bad thing for GE Vernova, but it is hard for the stock to rise when shares of hyperscalers -- responsible for most of the AI buildout -- fall.
Thursday isn't a GE Vernova-specific issue. Shares of other power equipment suppliers are down. Bloom Energy stock was off almost 10%. Caterpillar stock was down 5%.
All three shares had a good Wednesday, after SpaceX reported blowout third-quarter numbers, and CEO Elon Musk talked up endless AI demand.
"I don't think we're going to have [an AI computing] demand issue here," said Musk on SpaceX's earnings conference call. "And it's not impossible. I'm not saying this will happen. It's not impossible that we will have a six-month payback period for compute next year."
A six-month payback on data centers that cost tens of billions seems incredible. But SpaceX sales rose 161% year over year, to $14.6 billion. It also guided to first-quarter 2027 sales of about $35 billion.
"Meta and SpaceX this week demonstrated insatiable demand for more data center compute capacity," wrote StoneX analyst Gary Mobley on Thursday. What's more, spending is generating a return.
"The AI bear-case continues to loom in the back of the room," added Mobley. "Clearly, continuation of this heavy capital intensity is conditional on access to the debt/equity capital markets, private equity, vendor financing, bank financing and more."
Higher demand is great, but investors still have concerns about all the spending -- and financing -- needed to reach hyperscalers' AI dreams.
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