Steep bill for AI buildout punishes Meta, other tech favorites

The cost of the latest AI expansion proved costly for Meta and other key tech companies on Thursday. Investors sold shares of Meta Platforms and numerous firms at the heart of the AI sector following Meta's announcement of a new class of shares to raise capital. The tech giant's stock dropped 8%, its steepest decline since July.

SpaceX fell 9% and Nvidia, a leading semiconductor company and AI indicator, declined 4%. The Nasdaq Composite prepared for its largest decline in four months. Semiconductor firm Lam Research experienced a 10% drop after announcing weaker-than-expected results, sending the semiconductor index to its biggest decline since July. The market's pullback reflects concerns over the high costs associated with AI development and the potential for uneven returns.

Tech firms have invested heavily in AI spending over the past year, but recent interest rate hikes have led Wall Street to anticipate the need for companies like Meta to issue billions of dollars in stock to finance further expansion, potentially depressing share prices by increasing the number of shares outstanding. Tech experts argue that the higher costs and uncertain returns on investment are prompting investors to question the long-term viability of the AI boom.