Investors are weighing whether rapid growth in AI infrastructure can justify its cost after the Nasdaq Composite’s 2.6% fall, with major technology results and a Federal Reserve decision due next week.
The Nasdaq lost 694 points to close at 26,008.86 on Thursday, Oct. 22. Reuters described the drop as the index’s largest one-day decline since June. On Friday, the Nasdaq fell 0.2%, the S&P 500 lost 0.5% and the Dow Jones Industrial Average dropped 1.2%, the Associated Press reported. Reuters, citing LSEG IBES data, said third-quarter S&P 500 earnings were on pace to rise more than 32% year over year, with more than 100 companies having reported by Oct. 23.
Meta reported third-quarter revenue of $64.60 billion, up 26% from a year earlier, and capital expenditures of $34.91 billion. The company forecast capital expenditures of $135 billion to $145 billion for full-year 2026. CEO Mark Zuckerberg said, “Our investments are paying off, the core business is strong.” Meta said AI features are helping advertising revenue by increasing user engagement and improving ad recommendations and monetization. It also cautioned that newer projects may take longer to earn returns than its established operations. Edward Jones senior global strategist Angelo Kourkafas told the Associated Press that investors faced “the uncertainty around the timing of returns on those investments.”
Some AI companies borrow to finance investment, exposing them to higher interest costs, the Associated Press reported.
Companies supplying the buildout have also reported growth. Lam Research, a semiconductor-equipment maker, reported $8.22 billion in revenue for the quarter ended Sept. 27, up from $5.32 billion a year earlier. CEO Tim Archer said revenue, profit and earnings per share each set a record for the company’s September quarter.
The Federal Reserve raised its target range by a quarter percentage point in September, to 3.75%-4%. The Federal Open Market Committee meets Oct. 27-28, with its policy statement scheduled for 2 p.m. ET on Oct. 28 and a press conference at 2:30 p.m. Microsoft’s next earnings release is scheduled for Oct. 28; Alphabet’s call is set for 4:30 p.m. ET that day, and Amazon lists its third-quarter earnings call for Oct. 29.
