AI spending fears hit Meta and chip stocks in the week of Oct. 19, while oil spiked and the Dow eked out a weekly gain. As Wall Street worried about earnings and revenue data, it learned the AI boom comes with a bill, and the bill has a lot of zeros. Meanwhile, Houthi attacks in Saudi Arabia pushed Brent crude to its highest level since late April as it reached almost $115 per barrel.
AI Trade Makes A Comeback
Monday brought a bounce for the AI trade after last week’s rout. The VanEck Semiconductor ETF climbed nearly 3%, snapping nine straight losing days, and Intel rose 2% on a JPMorgan upgrade. CoreWeave didn’t get the invite, slipping 0.4% despite a Goldman Sachs upgrade, with its credit default swaps at distress levels. Homebuilder confidence fell to 29, its lowest since June 2012, as mortgage rates topped 7%. Builders are now as cheerful as a first-time buyer staring at a rate quote.
Earnings Lift The Dow
Tuesday belonged to the old-economy crowd on solid earnings and revenue data. The Dow jumped 529 points, or 1.02%, on upbeat earnings and cheaper oil. 3M popped more than 5% after earning $2.50 a share versus the $2.38 expected and raising guidance. Equifax leapt almost 12% and Hasbro gained more than 5%, while West Texas Intermediate crude fell 1.8% to $101.79. Housing kept sulking. September housing starts dropped 5.2% to a 1.22 million annual rate, well below the 1.3 million consensus.
Tesla Beats, Then Slips
Wednesday’s main event came after the bell. More solid earnings and revenue data hit the tape as Tesla earned an adjusted 48 cents a share, beating the 43 cents expected, on revenue of $28.05 billion, and generated $1.53 billion of free cash flow. Automotive revenue still fell 3% on lower prices and battery shortages, and the stock slid more than 3% after hours. Elon Musk had called a Tesla-SpaceX merger a “good idea” a day earlier, then said he felt like he was “tap dancing through a minefield.” Shareholders know the feeling.
AI Spending Fears Hit Meta
Thursday, the AI bill came due. Meta Platforms beat expectations, but the stock slid 7% after posting its first cash outflow in more than a decade on AI spending and announcing non-voting shares to raise capital. The Philadelphia Semiconductor Index plunged 6.7%, its biggest drop since June 23, and the Nasdaq had its steepest daily drop since early June. The boring stocks held the line, with Procter & Gamble up 5.6%.
According to Yahoo Finance, since last Friday’s close the S&P 500 lost 36 points or .47%. The NASDAQ dropped 185 points or .71%. While the DOW increased 213 points or .41% to finish as the week’s lone winner.
Oil Spikes As Dow Drops
Friday, tech handed the selling baton to everyone else, and the Dow tumbled more than 600 points. American Express fell more than 3% after announcing it would cut about 5% of its workforce to “prepare for AI.” Brent crude rose 3.1% to $116.72, its highest settle since April, on reports the U.S. and Israel may plan renewed attacks on Iran. The University of Michigan’s sentiment index came in at 48, near historic lows, as year-ahead inflation expectations rose to 4.7%.
It’s A Wrap
AI still drives this market, but investors now want receipts. Energy stocks hit a record while chips got clobbered, so money is rotating, not fleeing. Next week Alphabet, Microsoft and Amazon report, and the Fed is expected to hold rates Wednesday while traders listen for December hike hints. If the hyperscalers justify their AI spending, tech gets its mojo back. If not, the oil barons keep the corner office.
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