Meta's own credit rating just got slapped with a "negative" outlook. S&P Global says the company is headed toward free operating cash flow of -$22 billion this year, -$71 billion in 2027 and -$39 billion in 2028, all to feed a data center buildout whose payoff nobody can date. That was Friday. By the close, the Nasdaq had lost nearly 3% in a single session, and the people who run these machines were scrambling for cover.
Who Has the Power
Alphabet had its worst trading day ever on Thursday, shares plunging roughly 12% after search revenue fell short and free cash flow went negative. Amazon missed too, with its own negative free cash flow under the microscope. Microsoft, Alphabet's Google and Amazon have been on what the base reporting calls a "spending blitz" to build data centers and snap up GPUs. Meta, per S&P, expects capex to hit $140 billion this year, top $225 billion in 2027 and reach $252 billion in 2028.
Sit with those numbers. They're decisions made in boardrooms, financed by markets, and aimed at a payoff that S&P admits is "unclear" in timing. Philipp Schindler, Alphabet's chief business officer, said the hit to search came partly from lower monetization inside the company's AI Mode.
The borrowing is staggering. Elon Musk said SpaceX closed $40 billion in debt financing. Meta announced plans to raise $95 billion in equity. Microsoft raised $25 billion in a bond sale. Earlier this month, AI debt fears sent shares and bonds of "neocloud" companies tumbling. And according to Fortune, rising bond yields have sent borrowing costs sharply higher.
Who Gets Crushed
The Nasdaq sank 5.3% for October. Intel fell 25% on Friday, with another account putting the plunge above 28% after a weak outlook. The company cited a sharp drop in PC CPU demand tied to the high cost of memory. Micron dropped 5.5%, Nvidia 4%.
Yardeni's own note concedes the stakes: AI is now a major driver of corporate earnings and GDP growth, so stocks could dive further if the financial, physical or political constraints worsen. When one sector carries that much of the economy, everyone downstream is riding along, whether they bought a share or not.
The Wall Street Journal reported that investors are racing to get insurance on what it called the biggest market bet in history. Insurance for the people holding the bet. The rest of us get no policy.
The Reform Trap
The Federal Reserve held rates steady Wednesday, but Chairman Kevin Warsh talked tough on inflation, signalling it's only a matter of time before another hike. Expectations remain high for an increase in December. That prospect, per the reporting, exacerbated worries that tech companies may be borrowing too much to keep building.
Then there's the ballot box. Fortune reports political backlash against data centers is expected to help Democrats retake Congress, while the Iran war could re-escalate after the midterms. Analyst Ed Yardeni, though, says even the midterm elections are unlikely to derail the economy regardless of which party controls Congress. Read that again. The market's own veteran says the vote won't change the trajectory.
What They're Calling "Order"
Meta's spokesperson told Fortune the company disagrees with S&P, promising "significant product and business opportunities" and the goal of "delivering personal superintelligence to everyone."
Yardeni, for his part, wrote that the constraints are "healthy for the durability of the AI boom!" and that further jitters "could set up buying opportunities rather than signal the end of the boom."
A crash framed as a sale. A bailout of confidence before anyone has asked for a bailout of anything else. Meanwhile, the money rotated into defensive stocks, with the Dow gaining 1.7% for the month. Capital knows how to take care of itself.
- ai spending
- big tech
- alphabet
- nasdaq
- stock selloff
- meta
- amazon
- federal reserve