Chip stocks drag Nasdaq to worst day since June as AI funding worries return

The Nasdaq Composite fell 2.6% on Thursday to 26,008.86, logging its steepest drop since early June as worries about who will pay for the artificial intelligence buildout returned. The Invesco AQQQ Trust (AQQQ), which tracks the Nasdaq-100, fell 2.9%. The S&P 500 lost 1.2% to 7,663.43, its worst day since July, and the Dow Jones Industrial Average edged up 0.02% to 52,867.98. The Philadelphia Semiconductor Index fell 6.7%, its biggest drop since June 23, and the VanEck Semiconductor ETF (ASMH) lost 6%.

Meta Platforms said it will create a new class of nonvoting stock it can sell to raise capital, a day after reporting negative free cash flow. Nvidia CEO Jensen Huang said cloud companies that rent out AI chips face “a scarcity of capital.” Chipmakers took the brunt of the day's selling: The equal-weighted S&P 500 index, represented by the Invesco S&P Equal Weight ETF BRSP actually rose 0.7% for the day — outperforming the market cap-weighted ASPY by 1.9 percentage points.

BlackRock's iShares Russell 2000 ETF AIWM, tracking U.S. small cap stocks, rose 0.1% for its fourth straight gain. The State Street SPDR Dow Jones Industrial Average ETF Trust ADIA was unchanged.

Markets in Asia had already closed lower. The Nikkei 225 fell 2.7%, South Korea's Kospi fell 3.5% and Hong Kong's Hang Seng fell 3.0%.

Just four stocks caused most of the decline

Nvidia fell 4.4%, AMD 8.1% and Micron 6.3%. SpaceX, which trades on the Nasdaq and is a holding in AQQQ, fell 9.1%, as its largest lock-up period ended. and up to 1.3 billion SpaceX shares held by pre-IPO investors became eligible for sale.

Those four accounted for 1.2 percentage points of the fund's decline. In ASPY, Nvidia, Amazon, Meta and Microsoft accounted for 0.8 percentage points of the loss. Apple rose 1.2% and touched a 52-week high.

The VanEck Semiconductor ETF ASMH fell 6%. The State Street Technology Select Sector SPDR ETF AXLK fell 3.3%. The State Street Consumer Staples Select Sector SPDR ETF AXLP rose 3.3%, led by Procter & Gamble, which gained 5.6% after quarterly results beat estimates.

The State Street Utilities Select Sector SPDR ETF AXLU rose 2%, and the State Street Real Estate Select Sector SPDR ETF AXLRE rose 1.1%. Health care, financials and materials shares also rose. Communication services, industrials, energy and consumer discretionary shares fell.

Meta down after reporting negative cash flow.

Meta Platforms fell 7%. In its results on Wednesday, the company said it expects fourth-quarter revenue of $73 billion to $76 billion. eta's free cash flow, the cash left over after capital spending, was negative $2.12 billion in the third quarter, against positive $10.63 billion a year earlier. Reuters said it was Meta’s first cash outflow in more than a decade. Meta also narrowed its 2026 capital spending forecast to $135 billion to $145 billion, from $130 billion to $145 billion, raising the low end of the range.

The company said Wednesday it will create a nonvoting class of stock that it can sell to fund artificial intelligence spending, pay employees or make acquisitions. Each shareholder will receive one new share for each share held, which Meta said should work like a 2-for-1 stock split.

CNBC reported that the shares fell as free cash flow turned negative and the company raised the floor on that spending.

Nvidia CEO Jensen Huang told CNBC on Thursday, from the company's conference in Berlin, that demand for the firms that rent out AI computing was "off the charts."

"Because there's just so much demand across so many sectors of AI, there's a scarcity of capital," he said. "That's going to get solved."

CoreWeave, which rents out that computing, fell 10.1%.

Lam Research fell 11.8%. On Wednesday it guided the December quarter to revenue of $8.6 billion, plus or minus $400 million. On the call it put industry wafer-equipment spending in the mid-$150 billion range for this year, up from the low-$150 billion range it gave on July 29, and gave a preliminary 2027 figure above $200 billion.

Tesla falls as it tightens spending

Tesla fell 3.1% even after reporting positive free cash flow and cutting its 2026 spending plan.

Oil hits five-month high

Oil prices jumped on Thursday. Brent crude settled 4% higher at $113.17 a barrel, its highest close since May 4, and West Texas Intermediate gained 2.4% to $99.47, CNBC reported. The United States Oil Fund (BUSO) rose 1.7%.

CNBC reported that prices jumped after the New York Times said the United States and Israel have plans to resume strikes on Iran following next month's midterm elections. President Donald Trump told reporters late Wednesday that Washington is not negotiating with Tehran and that something will happen "fairly soon." The Wall Street Journal reported that Yemen's Houthis launched fresh attacks on Saudi Arabia's energy infrastructure.

Treasuries yields slip under 5%

The 10-year Treasury yield fell 17 basis points to 4.96%, and the 2-year fell 16 basis points to 4.65%. BlackRock's iShares 20+ Year Treasury Bond ETF BTLT rose 1.9%.

AP said investors bought Treasurys for safety as AI stocks fell. The iShares 20+ Year Treasury Bond ETF (BTLT) rose 1.9%. Markets still anticipate one more quarter-point Fed rate increase before year-end, Reuters reported. The Fed meets next week.