Tesla just did something unusual — it cut its spending forecast for the year — and that’s one thing that weighed on the chip sector Thursday.
Shares of Intel and Advanced Micro Devices fell about 8% on Thursday, while Micron Technology’s stock was down 6.3% at the close. Nvidia shares were off 4.4%, and Sandisk’s stock closed down 8.5%.
Some of the S&P 500’s biggest losers on the day were optical-networking stocks, with shares of Coherent falling 12.5% and shares of Lumentum losing 11.5%.
The weakness followed Tesla’s decision to reduce its full-year capital-expenditure target from $25 billion to $20 billion in its Wednesday afternoon earnings report. Capital expenditures are money the company is spending on assets, such as chips, that are meant to improve its value over time.
Tesla CFO Vaibhav Taneja attributed the move to “managing our capital deployment efficiently,” on the company’s earnings call.
Whether more disciplined spending plans for this year mean problems — or warning signs — for the AI trade remains to be seen. J.P. Morgan analyst Rajat Gupta noted that Tesla’s commentary from the earnings call suggested increases in spending next year and in 2028 as the company focuses on robotaxis, its Optimus humanoid robots, the Terafab chip-making venture and securing enough AI computing power.
StoneX analyst Mickey Legg took a similar view in a note to clients that the cut “seems like a deferral,” as Tesla’s spending should grow as it invests across its business.
Meanwhile, “underwhelming” results from semiconductor equipment maker Lam Research also contributed to Thursday’s declines, according to Jefferies equity analyst Jeffrey Favuzza.
The company said on its earnings call that it has near-term constraints in its supply chain, leading to a weaker-than-expected outlook for revenue in the December quarter. Chip-equipment companies are closely watched by technology-sector investors because corporate purchases of semiconductor equipment can be seen as a gauge of demand.
Lam’s stock fell 11.8% Thursday.
Meanwhile, Meta Platforms disclosed plans to create a new class of shares, opening the door for the company to raise money through a stock offering down the road. Evercore ISI analyst Mark Mahaney said in a note to clients the new share structure has him anticipating a capital raise of both debt and equity in the next three to six months.
Meta’s own earnings report stoked ongoing concerns around the massive amounts of spending and borrowing that have fueled the AI trade, Mizuho trading-desk analyst Daniel O’Regan said.
“The bigger issue is that capital markets are becoming more discriminatory toward AI, particularly around anything reliant on external financing,” O’Regan said in a note to clients.
Given that a large amount of data-center spending is being supported by debt and equity instead of companies’ operating cash flows, that could impact capex plans if AI financing becomes more expensive or limited, he added.
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