AI boom hits a wall on Wall Street as OpenAI cuts fundraising target while Meta gets a credit warning over its cash flow, spending and monetization

The AI boom on Wall Street may be encountering resistance as OpenAI reduces its fundraising target and Meta faces a credit warning over cash flow issues. OpenAI recently lowered its fundraising target from $30 billion to $20 billion, cutting the company's projected valuation from $1.4 trillion to $1.25 trillion. This move came just as tech stocks experienced a significant decline, adding to Wall Street's cautious approach towards massive spending plans.

Meta, meanwhile, has received a negative outlook from credit ratings agency S&P Global. The company's cash flow has turned negative, with projected free operating cash flow expected to remain negative through 2028. S&P noted that Meta's ability to monetize AI investments is more limited than its competitors, who are leveraging data centers for revenue generation through leasing and other means.

Meta's response to the negative outlook remains defensive, with a spokesperson stating that the company expects to see new revenue streams from its AI investments, including advertising tools and agentic apps. However, the broader Wall Street environment is bearish, with rising bond yields increasing borrowing costs and political factors potentially benefiting Democrats in the upcoming elections.

Despite these challenges, some analysts remain optimistic about the long-term prospects of the AI boom, viewing any retrenchment as a necessary step towards greater efficiency and long-term value creation.