The vast amount of capital needed to fund the artificial-intelligence build-out is forcing tech giants to hunt for ever-larger sums of cash -- and Wall Street is raising a bright red flag.
Signals from Meta Platforms that it could soon go on a cash-raising spree helped trigger another massive rotation trade on Thursday, with investors dumping stocks connected to the AI boom and piling into almost everything else, from U.S. Treasurys to the beaten-down shares of home builders and software companies.
An already nervy market was also unsettled by disappointing earnings from Tesla and fresh tensions in the Middle East, which propelled oil prices to their highest levels since May.
The rally in bonds was particularly noteworthy, sending the yield on the 10-year Treasury note tumbling back below 5% in its largest one-day drop since March 2023, when markets were gripped by a regional banking crisis.
The big moves came after Meta announced plans Wednesday to create a new class of nonvoting stock to raise the capital it needs for developing and serving AI models. Initial excitement over the company's record third-quarter revenue quickly gave way to mounting anxiety over how the Facebook parent and its peers will secure enough capital to fund the ongoing AI race.
"The growing concern with AI isn't about technology anymore," said Michael Antonelli, a market strategist for Baird Private Wealth Management. "It's 'how can we all fund this at once?' "
Updates to follow as news develops.
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