When Spending Rises and Shares Fall, What Do We Watch?

Nasdaq Falls 2.6% as the Dow Holds Flat

Wall Street fell on Thursday as tech sold off. The Nasdaq Composite lost 2.6% and the S&P 500 lost 1.21%, while the Dow edged up 0.02% to end flat. The Russell 2000 rose 0.11%.

The VIX gained 14.09% to 19.03. CNBC called it the Nasdaq’s worst day since June.

Yesterday's Checkpoints, Reviewed

Wednesday’s article set three checks. The semiconductor ETF failed to hold above its $510.36 close and fell 6.79% to $475.69. WTI rose 2.39% to $99.47 rather than staying near $97, and the 10-year yield fell to 4.95% instead of holding around 5.15%.

All three missed. As we noted, the reaction to Tesla and Meta results was not yet in prices, and today it arrived all at once.

Meta Falls 6.98% After Raising Its Spending Plan

Meta fell 6.98% to $648.85. According to CNBC, third-quarter capital spending rose to $34.9 billion, leaving free cash flow negative by $2.1 billion. The company raised its 2026 capex outlook to $135 billion-$145 billion and said it would create a non-voting share class to help fund the buildout.

Beginner note: capex is money spent on long-lived assets such as data centers and servers, and free cash flow is operating cash minus that spending. A negative number means a company is spending more than it earns, so the gap must be covered with debt or new shares.

Reuters said fourth-quarter revenue guidance of $73 billion-$76 billion topped the $73.6 billion forecast. Deutsche Bank said AI spending is helping ad performance and engagement, while Bank of America flagged capital raises as an overhang. We read the drop as investors looking at the pace of spending before the earnings beat.

AI Spending Worries Spread to Power and Cloud Stocks

Yahoo Finance reported GE Vernova down 11%, Vertiv down 7% and Eaton down 6%, all suppliers of power and cooling gear for data centers. Alphabet fell 3.15%, Amazon 4.57% and Microsoft 2.23%.

Apple rose 1.23%, Walmart 2.82% and Deere 1.11%, a sign money moved away from AI-linked names. Today showed that bigger spending plans do not help if the way to pay for them is unclear.

Chip Stocks Had Their Worst Day Since June

The semiconductor ETF fell 6.79% to $475.69. Reuters said the Philadelphia Semiconductor Index dropped 6.7%, its biggest daily fall since June 23. Intel lost 8.04%, AMD 8.10%, Sandisk 8.51% and Marvell 8.70%.

Nvidia fell 4.40%, Broadcom 4.31% and TSMC 4.52%, smaller declines. Investing.com cited AMD’s high valuation as one reason for its drop.

What Micron and Sandisk Signal for Korean Memory Stocks

Micron fell 6.26% to $856.49 and Sandisk fell 8.51% to $1,260.93, similar to or worse than the 6.79% drop in the chip ETF.

Whether Korean memory shares follow depends on foreign flows more than on the size of the US move. Micron trades at 4.1 times next year’s earnings, covered in the insight below.

SpaceX's 9.14% Drop Collided With Merger Questions

SpaceX fell 9.14% to $144.75, giving back Wednesday’s 7.79% gain. According to CNBC, Musk said both companies formed special committees to study a merger but had not agreed on terms and there is no guarantee. Bloomberg reported a target of the first half of 2027 for an announcement.

Reuters ran a headline saying Musk’s public backing could complicate talks. We could not open the article, so the reason is unconfirmed.

Some Brokers Raised Tesla's Target

Tesla fell 3.08% to $374.58 after reporting results on Wednesday evening. CLSA raised its rating from Underperform to Hold and its target from $310 to $400. BNP Paribas Exane moved from Underperform to Neutral and lifted its target from $266 to $420.

RBC went the other way, cutting Tesla from Outperform to Sector Perform. The average analyst target is only 7.2% above the price, which leaves little room for a stock at 171.1 times next year’s earnings.

Moderna Falls 17.57% on Leaked Trial Data

Moderna fell 17.57% to $202.63 and partner Merck fell 1.76%. Yahoo Finance said part of the Phase 3 melanoma vaccine data appeared briefly on a medical news site during the session. It was under embargo until Saturday’s ESMO congress.

Reuters reported a 42% lower risk of recurrence or death than Keytruda alone. The result was positive, but analysts said it fell short of high expectations after a big run this year.

WTI Rises to $99.47

WTI rose 2.39% to $99.47. CNBC said The New York Times reported US and Israeli plans for renewed strikes on Iran after the midterm elections, and the Houthis claimed attacks on Saudi sites. WSJ’s headline said Brent hit its highest level in more than five months.

Spot gold fell 2.16% to $4,060.4. WSJ reported silver futures down 4.6% to a 2026 low.

Yields and the VIX

The 10-year Treasury yield closed at 4.95% and the 30-year at 5.29%. The 10-year was 5.15% the day before, so it fell. Yields dropping on a big stock selloff suggests demand shifted toward safety.

Still, yield levels remain high. The VIX rose to 19.03.

What to Watch Next

First, whether the semiconductor ETF holds above today’s $475.69 close. Second, whether the 10-year yield stays around 4.95%. Third, whether WTI stays in the $99 range, and whether Microsoft and Alphabet on the 28th and Amazon and Intel on the 29th deepen or ease the worry over AI spending.

What We Learned Today

According to Wall Street rating data, CLSA and BNP Paribas Exane each raised Tesla by one notch on the 22nd, while RBC cut it from Outperform to Sector Perform. Tesla fell 3.08% that day.

The two upgrades still sit at Hold and Neutral, so neither is a strong buy call.

On Yahoo Finance consensus, Micron trades at 4.1 times forward earnings, and the analyst target price is 82.2% above the current price. The median of the stocks we follow is 24.0 times.

Beginner note: forward P/E shows how many times next year’s earnings the share price is. A low number means the stock is cheap relative to earnings, but if the memory cycle turns, estimates fall first, so a low number alone is not safety.

Sources

• Yahoo Finance Stock market today: S&P 500, Nasdaq tanks as tech stocks sink amid AI trade worries, Meta shares plummet
• CNBC Meta stock sinks nearly 7% as AI spend pushes free cash flow negative
• Reuters (Investing.com) Meta falls as investors balance Muse growth with rising AI costs
• Yahoo Finance GE Vernova Slumps 11% as Meta's Spending Outlook Stokes AI Financing Worries
• Yahoo Finance S&P 500, Nasdaq end sharply lower as revived AI doubts ignite tech selloff
• CNBC SpaceX stock jumps 10% after earnings beat and Musk hints at Tesla tie-up
• Yahoo Finance Stock Market Today, Oct. 22: Moderna Stock Plummets 18% on Melanoma Vaccine Data Leak Reports
• Reuters (Investing.com) Merck/Moderna cancer vaccine cuts melanoma death or recurrence risk by 42%, shares fall
• CNBC Oil rises on Middle East supply worries
• Investing.com Why is Advanced Micro Devices stock sliding today?