Nasdaq dives 750 points as investors reassess AI spending
Investors are fretting over the massive debt AI companies are relying on to finance data center and chip spending, Wall Street analysts say.
On Thursday, the Nasdaq Composite Index plunged 751 points, or 2.8%, as investors grew increasingly apprehensive about the viability of massive AI investments and soaring oil prices. The broader S&P 500 and Dow Jones Industrial Average also saw declines, falling 1.4% and 0.1% respectively. Analysts worry that AI companies are accruing significant debt to finance costly data center operations and question whether they will generate the anticipated profits.
AI development is highly capital-intensive, and companies are now heavily reliant on the goodwill of equity and debt investors, but recent market conditions are becoming less supportive. Adam Crisafulli, a leading expert, warned that tightening credit conditions could impede companies' ability to fund necessary AI infrastructure expansion.
The Brookings Institution estimates that developing AI infrastructure between 2025 and 2032 will require over $10 trillion, surpassing all previous investment patterns in U.S. history. Despite the high costs, many major players in the AI sector remain profitable, but investors are reevaluating the substantial expenditures as stock prices surge.
Mixed earnings reports contributed to the market slump, with Meta Platforms down 7.4% and Tesla falling 2.1%. Additionally, rising oil prices, fueled by tensions in the Iran conflict, impacted stock performance, with West Texas Intermediate oil reaching $99.44 a barrel and Brent crude at $113 a barrel.
Written by urgent.news from CBS News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
