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Tag: AI Spending

S&P Cuts Meta’s Outlook to Negative as AI Spending Hits $140 Billion
S&P Global Ratings has cut its outlook on Meta Platforms to negative, a warning that the Facebook and Instagram owner’s huge spending on artificial intelligence could strain its finances for years.

The rating itself did not change. S&P kept Meta’s AA- credit rating, one of the strongest grades a company can hold. But the outlook moved from stable to negative on Friday, October 30. In plain terms, that means S&P now sees a real chance of a downgrade within the next couple of years, not that a downgrade has already happened.

What Happened

S&P said it was worried about two things: how long Meta’s capital spending will stay very high, and how long its free operating cash flow will stay negative. Free operating cash flow is, simply, the cash left after a company pays for the things it needs to run and grow. When that number is negative, the company is spending more cash than it brings in from its operations.

S&P now expects Meta’s capital spending — money spent on long-term assets such as data centres — to reach about $140 billion in 2026 and rise above $225 billion in 2027, reaching $252 billion in 2028. It also expects a free operating cash flow deficit of $71 billion in 2027.

Meta’s own guidance points in the same direction. Last week the company forecast full-year 2026 capital spending of $135 billion to $145 billion, after reporting a third-quarter free cash flow deficit of $2.12 billion. That was its first negative quarter for free cash flow in more than a decade.

Why It Happened

The reason is the AI buildout. Meta is building data centres and buying computing power so its AI tools can run and improve. That costs a fortune, and the payoff is not instant.

S&P put it bluntly: “Meta’s ability to monetise its AI investments is more limited than that of its peers.” Microsoft and Google can sell AI computing directly to other companies through their cloud businesses. Meta has no equivalent product. Its bet is that better AI will make its ads and apps more valuable, which is harder for a credit analyst to measure.

S&P also pointed to leverage, which compares debt with earnings. It said Meta’s leverage could climb above 1.0 times as early as 2027, up from about 0.1 times last year. That 1.0 level is the threshold S&P watches for the AA- rating. Much of the rise comes from leases on data centres, which S&P counts in a similar way to debt.

Why It Matters

A credit rating affects how cheaply a company can borrow. A lower rating usually means higher borrowing costs. Meta is not in trouble today — AA- is still a very strong rating, and even a one-notch downgrade would leave it firmly in high-grade territory. But the warning matters because it shows that even the biggest tech companies are now being judged on whether their AI spending pays for itself.

This is not just a Meta story. Investors spent October asking the same question about Alphabet, Amazon, Microsoft and others: how much are they spending, and when will it come back as profit? That worry helped drive the Nasdaq down 5.3% in October, its worst month since March 2025.

What Happens Next

Meta disagreed with S&P. A spokesperson said: “We respectfully disagree with S&P’s assertion about Meta’s AI monetisation capabilities. We see significant product and business opportunities ahead of us, supporting our very strong credit profile.”

S&P said it could still downgrade Meta if spending stays high and free cash flow stays negative past 2028, or if leverage stays above 1.0 times. On the other side, if Meta shows it can slow its spending or turn its AI tools into clear revenue, the outlook could steady again.

Final Thoughts

Think of it like a household that takes on a big mortgage to build an extension. The house may be worth more in the end, but while the building work goes on, the monthly bills are high and there is less cash spare. S&P is not saying Meta cannot afford the extension. It is saying the building phase may last longer, and cost more, than it first expected — and lenders are starting to notice.

Key figures:
- Meta’s credit rating: AA-, affirmed; outlook cut to negative from stable (October 30, 2026)
- S&P’s expected capital spending: about $140 billion in 2026, above $225 billion in 2027, $252 billion in 2028
- Meta’s own 2026 capital spending guidance: $135 billion to $145 billion
- Meta’s third-quarter free cash flow: negative $2.12 billion
- S&P’s expected 2027 free operating cash flow deficit: $71 billion
- Leverage: about 0.1 times last year, could pass 1.0 times as early as 2027
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

Sources: CNBC report on S&P’s Meta outlook change (via CNBC TV18: https://www.tradingview.com/news/cnbctv:4903003dd094b:0/); Reuters report on S&P’s action (https://941theduke.com/2026/10/30/sp-global-revises-outlook-on-meta-to-negative-on-cashflow-concerns/)

Related: Nasdaq Ends October With Its Worst Month Since March 2025 as Tech Sell-Off Deepens
October 31, 2026
Nasdaq Falls 3% as Tech Sell-Off Deepens — Worst Day Since June
Tech stocks took a hard hit on Friday, October 30. The Nasdaq composite fell 3% during the day, putting Wall Street on track for its worst day since June. The sell-off was led by big technology names, and it came right after a rough week for the same stocks.

The numbers below are from trading during the day, not the final closing numbers. Markets were still open when these figures were reported, so the final results may look a little different.

What Happened

The Nasdaq composite dropped 3% as of early afternoon Eastern time. The S&P 500 fell 1.8%, and the Dow Jones Industrial Average dropped 496 points, or 0.9%.

The Nasdaq 100, which tracks the 100 largest non-financial companies on the Nasdaq, also fell about 3%. Reuters reported it was on course to lose just over $1 trillion in market value on the day.

Not every stock fell. Defensive stocks — the kind of companies people turn to when they want safety — actually rose. Walmart, Coca-Cola, and Procter & Gamble all moved higher while chipmakers dropped.

Why It Happened

Two earnings reports from Thursday night set the tone: Intel and Amazon.

Intel fell about 29% after it gave a weak forecast for the fourth quarter. The company said the slowdown in personal computer sales should last at least through the first half of next year. It also pointed to manufacturing problems, a memory chip shortage, and heavy spending to expand production. Reuters said the stock was set for its biggest one-day loss on record.

Amazon fell about 2% during the day, after dropping as much as 10% in after-hours trading on Thursday. The company reported quarterly capital spending of $77.3 billion, much higher than the $58.7 billion analysts expected. That spending is mostly going toward building artificial intelligence infrastructure — data centers, chips, and computing power.

Other chip stocks fell too. Nvidia dropped almost 4%, and AMD lost more than 9%.

This came one day after Google’s parent company Alphabet had its worst day ever on Thursday, falling 12.6%. Alphabet slipped about 1% more on Friday. Earlier this week, we covered that drop in detail: Why Google Stock Crashed 12.6%: What Investors Need to Know.

Key Figures
- Nasdaq composite: down 3% during Friday trading
- S&P 500: down 1.8%, on track to erase its gain for October
- Dow Jones: down 496 points, or 0.9%
- Intel: down about 29% after a weak fourth-quarter forecast
- Amazon: down about 2%, after capital spending of $77.3 billion beat expectations of $58.7 billion
- Nvidia: down almost 4%; AMD: down more than 9%
- Nasdaq 100: on course to lose just over $1 trillion in market value on the day
Why It Matters

The bigger worry here is simple: companies are spending huge amounts of money on AI, and investors are starting to ask when that spending will pay off.

Think of it like this. Imagine a restaurant owner borrows a lot of money to build a second location. If customers start coming in quickly, the bet pays off. But if the new location sits half-empty while the loan payments pile up, investors get nervous. That is roughly what is happening with AI right now. Tech giants are pouring tens of billions into data centers and chips, and the market wants proof that the returns will come soon enough.

October has already been a rough month for tech. Through Thursday’s close, the Nasdaq 100 was down 3.31% for the month, on track for its first monthly decline in three months, even though it is still up more than 16% for the year.

At the same time, the S&P 500 was on track to erase its entire gain for October, even though it set an all-time high earlier in the month. That shows how fast sentiment can change.

What Happens Next

A few things to watch. First, the final closing numbers for Friday — the early-afternoon figures above will be updated once trading ends. Second, more big tech earnings are still to come, including Apple and Meta, which could either calm the market or add to the selling. Third, investors will keep a close eye on whether companies start talking about slowing down their AI spending, or whether they double down.

It is also worth remembering that a 3% drop, while sharp, does not erase the year’s gains. The Nasdaq 100 is still well up for 2026. Big down days happen, even in strong years.

Final Thoughts

Friday’s sell-off is a reminder that even the strongest market trend can reverse quickly when expectations get too high. Investors loved the AI story all year, but now they want to see the profits behind the spending. Intel’s weak forecast and Amazon’s huge spending bill gave them a reason to step back.

For everyday investors, the lesson is not to panic over one bad day. It is to check whether the companies you own are actually making money from their big bets — or just spending more and hoping.

Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

Sources: CNBC — Stock market today live updates, Associated Press via Barchart — tech sell-off drags Nasdaq down 3%, Reuters coverage of the Nasdaq 100’s $1 trillion market value drop
October 30, 2026
Amazon Shares Fall 7% After Earnings Miss, Even as Cloud Growth Hits 39%
Amazon reported its third-quarter results on Thursday, October 29, and investors did not like what they saw. The company’s shares fell about 7% in after-hours and premarket trading, even though its cloud business had one of its best quarters in years.

That reaction tells you a lot about how the stock market works right now. Good news is not always enough. When a company is spending as much money as Amazon is, investors want everything to be perfect.

What Happened

Amazon’s total sales rose 12% to $201.9 billion in the three months ended September 30, 2026. That was slightly below the $202.31 billion analysts expected.

Earnings per share came in at $1.89, also below the $1.96 that analysts had forecast. Net income fell slightly to $20.7 billion, from $21.2 billion a year earlier. Part of that drop is because last year’s quarter included a $9.5 billion one-time gain from Amazon’s investment in Anthropic, an AI company. Without that gain, the comparison would look better.

The bright spot was Amazon Web Services, or AWS, the company’s cloud computing business. AWS sales jumped 39% to $46.0 billion, its fastest growth in nearly five years. AWS now runs at a $184 billion annual revenue pace. Its operating profit rose to $17.8 billion.

Advertising revenue grew 11% to $19.6 billion, but that was also below expectations of $20.8 billion. Online store sales grew just 2% to $68.5 billion.

For the holiday quarter, Amazon expects sales of $240 billion to $247 billion, growth of 12% to 16% from a year earlier. The middle of that range was a little below what analysts had hoped for.

Why It Happened

The main reason investors sold the stock is spending. Amazon spent $77.3 billion on property and equipment in the quarter alone, more than double the $35.1 billion it spent a year earlier. Most of that money goes to data centres and AI chips.

For the full year, Amazon is keeping its capital spending plan at about $220 billion. That is a huge number. It is also why the company’s free cash flow, the cash left over after spending on things like data centres, turned negative. Over the past twelve months, free cash flow was negative $42.4 billion, compared with a positive $14.8 billion a year earlier.

Think of it this way. Imagine a shop owner who is making more money than ever, but is also building ten new shops at the same time. The business looks great on paper, but the bank balance goes down because all the cash is going into construction. That is roughly what Amazon is doing, except the “shops” are data centres for artificial intelligence.

Amazon’s chief executive, Andy Jassy, said the company expects AWS revenue to grow by more than 40% in both 2027 and 2028. The company says customers are using the new AI capacity almost as fast as it is built. But investors want proof that this spending will turn into steady profits, not just faster revenue growth.

Key Figures
- Total sales: $201.9 billion, up 12% (expected: $202.31 billion)
- Earnings per share: $1.89 (expected: $1.96)
- AWS sales: $46.0 billion, up 39%
- AWS operating profit: $17.8 billion
- Quarterly capital spending: $77.3 billion
- Trailing twelve-month free cash flow: negative $42.4 billion
- Fourth-quarter sales forecast: $240 billion to $247 billion
- Full-year 2026 capital spending plan: about $220 billion
Why It Matters

Amazon is not alone. This week, several big technology companies reported strong revenue growth but negative free cash flow because of heavy AI spending, and their stocks fell. It is a sign that investors are starting to ask harder questions about the AI boom: how much will all this spending cost, and when will it pay off?

Related reading: Why Google Stock Crashed 12.6%: What Investors Need to Know

Amazon’s case is also a useful lesson for beginners. A company can grow fast and still see its stock fall. The stock market reacts to expectations, not just results. When expectations are very high, even a small miss can cause a big drop.

What Happens Next

All eyes will be on the holiday quarter. Amazon’s fourth quarter is its biggest of the year, and the $240 billion to $247 billion forecast will be tested against real holiday shopping. Investors will also watch whether AWS growth stays above 40% next year, as the company predicts, and whether free cash flow starts to improve as the new data centres fill up.

Final Thoughts

Amazon’s business is still growing, and its cloud division is performing very well. But the stock’s fall is a reminder that growth funded by massive spending comes with a question mark. Until the cash starts flowing back, investors will stay nervous, and that nervousness can hit even the strongest companies.

Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

Sources: CNBC, “Amazon falls 7%, Intel plunges 25% in premarket trading, as pressure mounts after earnings” (https://www.cnbc.com/2026/10/30/amazon-intel-earnings-big-tech-ai-spending-concerns.html); Amazon Q3 2026 earnings release (https://www.aboutamazon.com/news/company-news/amazon-earnings-q3-2026-report).
October 30, 2026