Investing.com — Meta said last week that recent capital raises from companies including Alphabet and SpaceX, as well as expected fundraising from Anthropic and OpenAI, have created an “increasingly challenging fundraising environment,” raising questions about whether there is enough capital to fund AI spending plans.
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In results announced Wednesday, Meta reported that its revenues increased 26% from the previous year to $64.6 billion, but its free cash flow was -$2.1 billion.
It raised the low end of its 2026 capital spending forecast to a range of between $135 billion and $145 billion and announced a new class of non-voting shares to facilitate future capital raisings.
Other leaders have expressed similar concerns. Broadcom CEO Hock Tan has warned that capital could become the biggest constraint to AI development. BlackRock CEO Larry Fink said the competition for capital was the fiercest he had seen in his career. Nvidia CEO Jensen Huang said demand for neocloud was “off the charts” but capital was tight.
AI-related stocks led the selling. Nvidia fell 4.4%, CoreWeave fell 10.1% and Lam Research fell 11.8%, while the iShares Semiconductor ETF (SOXX) fell 6.8%. The Nasdaq fell 2.6%, its worst day in four months.
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Money has been moving to other parts of the market rather than exiting stocks altogether, Yardeni Research said.
The S&P 500 index, weighted equally for each company, edged up 0.7%, while the version weighted by company size fell 1.2%. The Dow Jones rose slightly by 0.02% and the Russell 2000 by 0.11%.
Treasury yields fell across all maturities. The 2-year yield fell to 4.64% and the 10-year yield fell below 5% for the first time in almost a month.
Yardeni said the rally suggests market participants are increasingly concerned that tighter access to capital could slow the development of AI.
Yardeni nevertheless expects the biggest players to retain access to funding and sees market tightening as healthy for the AI boom, as it should mean money is used more efficiently and the risk of overspending decreases.
Amazon, Alphabet, Meta, Microsoft and Oracle are expected to spend nearly $780 billion in 2026 and more than $1 trillion annually from 2027 to 2030. Yardeni said their strong cash flows, balance sheets and market access should allow them to continue investing in AI.
Original article
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