US tech shares fall as investors weigh data-centre funding costs
The October 22 selloff followed Meta’s plan to issue non-voting shares, as investors weighed how further data-centre construction would be funded.
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The October 22 selloff followed Meta’s plan to issue non-voting shares, as investors weighed how further data-centre construction would be funded.
US technology shares fell sharply during October 22 trading as investors questioned the cost and returns of further data-centre construction, CNA reported. The Nasdaq Composite was down 2.6%, while semiconductor shares suffered steeper losses.
The retreat followed Meta Platforms’ announcement a day earlier that it would use new Class C shares to fund artificial intelligence (AI) spending and other priorities. Those shares carry no voting rights. CNA also reported that Lam Research’s results weighed on sentiment.
| Index or company | Change during trading |
|---|---|
| Nasdaq Composite | −2.6% |
| Philadelphia Semiconductor index | −6.7% |
| Meta Platforms | −7% |
| Lam Research | −12% |
| CoreWeave | −10% |
Analysis
Technology companies had borrowed heavily over the preceding year. CNA reported that Wall Street expected rising borrowing costs to encourage companies such as Meta to sell billions of dollars in stock for further construction. Issuing additional shares can reduce existing shareholders’ percentage ownership, known as dilution. Investors worried that this could put pressure on share prices; it was a prospective risk, not a confirmed outcome.
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Meta’s earnings illustrated the funding demands. Its third-quarter free cash flow—cash remaining after capital spending—was negative $2.12 billion, compared with positive $10.63 billion a year earlier. CNA described that as Meta’s first cash burn in more than a decade.
Matthew Maley, chief market strategist at Miller Tabak, attributed the selling to questions about returns on the spending. In his assessment, investors increasingly expected the payoff to take longer.
The concern also appeared in credit markets. Credit default swaps, contracts used to protect against a borrower failing to repay debt, reflect perceived default risk. CNA reported that these measures had largely risen over the preceding year for major companies building AI infrastructure, with Meta’s reaching a record on October 22.
CoreWeave’s unsecured bonds—debt not backed by specific collateral—had seen their yields climb to 15% during the previous week’s selloff, rather than the October 22 session. Higher yields indicate a higher return demanded by bond investors.
Meanwhile, investors bought US Treasury bonds, pushing their prices higher. Joe Saluzzi, co-head of equity trading at Themis Trading, described the moves as a shift out of technology shares and toward safer assets.
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