Shares of Nvidia, AMD, and Micron dropped sharply in premarket trading on Thursday, as investors grappled with conflicting signals from major AI customers about future capital expenditure. The selloff underscores a growing Wall Street dilemma: whether the artificial intelligence boom can justify its massive spending when key buyers are sending mixed messages.
Nvidia fell 2.4%, while AMD and Micron declined between 2.9% and 5.3% in early trading. Nasdaq 100 futures slid 1.93%, reversing part of Wednesday's technology-led recovery. The moves reflect a market that is increasingly demanding clarity on AI returns, even as companies continue to invest heavily.
Tesla's Capex Cut Raises Growth Questions
Tesla reduced its 2026 capital expenditure forecast to approximately $20 billion from more than $25 billion, even as quarterly free cash flow reached $1.53 billion. Its $4.73 billion in capital spending was substantially below analyst expectations. The lower investment helped cash generation but raised questions about the pace of Tesla's robotaxi, robotics, and AI infrastructure expansion. Shares fell approximately 5.3% before the bell.
Tim Waterer, chief market analyst at KCM Trade, told Bloomberg that investors are proving difficult to satisfy. Higher capital expenditure raises concerns about returns, while reducing spending creates doubts about future growth. However, Tesla has not specified how much of the reduction involves AI infrastructure rather than other investments.
Meta's Higher Spending Ceiling Exposes the Opposite Concern
Meta reported $64.6 billion in third-quarter revenue, up 26% from a year earlier, while raising the lower end of its annual capital expenditure forecast to $135 billion from $130 billion. The upper limit remains $145 billion. Its earnings release also showed negative free cash flow of $2.12 billion, reflecting substantial infrastructure investment. Operating profit was affected by a separate $9.89 billion legal charge, meaning the entire decline in operating margins cannot be attributed to AI expenditure.
Importantly, Meta shares initially rose after the results as investors welcomed encouraging adoption of its AI products. Nevertheless, Ben Barringer, head of technology research at Quilter Cheviot, told The Wall Street Journal that elevated expectations are making it increasingly difficult for technology companies to deliver results strong enough to satisfy investors.
Lam's Earnings Beat Fails to Reassure Chip Investors
Lam Research reported record quarterly revenue of $8.22 billion and adjusted earnings of $2.20 a share, exceeding expectations. Yet its shares fell approximately 8.5% premarket after the semiconductor-equipment maker forecast around $8.6 billion in revenue for the following quarter, broadly matching consensus. The reaction illustrates how investors are demanding more than historical earnings strength.
Nvidia supplies AI accelerators, AMD competes in advanced processors, and Micron provides memory essential to AI computing. All three depend on customers continuing to expand capacity. Stifel analyst Brian Chin, speaking to MarketWatch, argued that favorable memory-market conditions could persist for another two to three years, even if Micron's valuation does not rise significantly.
The broader market's sensitivity to AI spending was evident in Wednesday's tech-led recovery, which quickly faded. As investors weigh the risks of overinvestment against the potential for underinvestment, the sector remains volatile. The coming quarters will likely hinge on whether companies can translate massive capital outlays into tangible revenue growth and profitability.
This article is for informational purposes only and does not constitute financial advice.
