Meta's 7% slide and a chip-stock rout handed the Nasdaq its worst day since June, while bonds caught a bid
The S&P 500 fell 1.21% and the Nasdaq dropped 2.6% as investors balked at the cost of the AI build-out. The Dow finished flat thanks to Lockheed Martin, and the 10-year Treasury yield posted its biggest one-day drop since March 2023.
Photo: Raphael Loquellano / Pexels
Wall Street spent Thursday re-pricing the cost of artificial intelligence, and the bill landed hardest on the companies doing the spending. Meta Platforms, a day after beating revenue estimates, led a broad sell-off in technology shares that pulled the Nasdaq to its worst session in more than four months.
The S&P 500 fell 1.21% to about 7,663 (7,663.43 on Yahoo Finance data, 7,663.39 in Business Insider's closing tally), which the Associated Press described as its worst day since July. The Nasdaq Composite dropped 2.6% to 26,008.86, its largest decline since June 5, according to Reuters, and the Nasdaq 100 lost 2.90%. The Dow Jones Industrial Average was the exception, ending up 0.02% at roughly 52,867.
Meta sets the tone
Meta closed down 6.98% at $648.85, according to Yahoo Finance data. Reuters said it was the stock's largest drop since July. On Wednesday evening, extended trading had initially sent the shares more than 4% higher; that move did not survive the regular session.
The concern was cash. Meta reported negative free cash flow of $2.12 billion in the third quarter, compared with positive $10.63 billion a year earlier, which Reuters described as the company's first cash burn in more than a decade. It also raised the low end of its 2026 capital spending forecast to $135 billion from $130 billion, leaving the top at $145 billion.
The other piece was the new class of non-voting Class C stock. Reuters reported that Meta said it could raise hundreds of billions of dollars over several years through the shares to fund AI investments, acquisitions and employee pay, with issuance beginning as early as fall 2026, and that the filing noted this helps avoid debt financing that could weigh on its credit ratings. CNBC also flagged a disclosure that Mark Zuckerberg could have faced a multibillion-dollar bill under a proposed California wealth tax, and that the new stock plan was part of what convinced him to stay in the state.
Credit markets noticed as well. Meta's five-year credit default swaps traded at a record 114.79 basis points on Thursday, Reuters reported, a sign that worries about AI spending are reaching bond investors, not only stockholders.
"It's just becoming more and more evident to people that it's going to take a lot longer," Matthew Maley, chief market strategist at Miller Tabak, told Reuters, referring to the return on AI spending.
Chips take the bigger hit
The selling spread quickly to the suppliers of the AI build-out. The Philadelphia Semiconductor Index fell 6.72%, according to Yahoo Finance data. Lam Research dropped 11.76% after its results, Advanced Micro Devices lost 8.1% and Nvidia fell 4.4%. SpaceX, which had jumped 7.8% on Wednesday after its first profit as a public company, fell 9.14%.
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What held the Dow up
Defense and industrial names kept the blue-chip average afloat. Lockheed Martin climbed 6.96% after raising its 2026 sales and profit forecasts and announcing a framework agreement to sell the Pentagon at least 850 F-35 jets over 10 years, a deal Reuters valued at at least $78 billion. Its backlog rose 27% from the prior quarter to a record $292 billion, the company said.
Bonds, oil and gold
Investors moved into Treasuries. The 10-year yield fell 0.193 percentage point to 4.952%, according to Dow Jones Market Data based on Tradeweb's 3 p.m. values, its largest one-day decline since March 10, 2023 and its lowest level since September 17. Treasury Department data put the 10-year at 4.96% and the 2-year at 4.65%, down from 4.81% on Wednesday.
The bond rally came even as oil climbed. West Texas Intermediate crude gained 2.4% to settle at $99.47 a barrel, CNBC reported, after The New York Times said the U.S. and Israel had drawn up plans for renewed strikes on Iran after next month's midterm elections. CNBC said Brent reached its highest settlement since May 4. Gold went the other way: futures fell 2.7% to about $4,038 an ounce, according to Yahoo Finance data. The Cboe Volatility Index rose 14.09% to 19.03.
On rates, markets were pricing about an 89% chance that the Federal Reserve holds next week, and around 76% odds of a quarter-point hike in December, according to Trading Economics.
What carries into Friday
Anthropic could publicly file its IPO prospectus as soon as Friday, according to multiple reports, offering an early test of appetite for AI after Thursday's selling. American Express reports before Friday's open, and the Fed's decision is due next week. The open question for Friday is whether Thursday's move was a one-day reset in AI expectations or the start of a longer reckoning with the cost of the build-out.
