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Nasdaq dives more than 750 points as investors worry massive AI spending won't pay off
CBS News • • business
Key Points:
- Stocks declined sharply on Thursday due to growing concerns about the profitability of massive AI investments and persistently high oil prices, with the Nasdaq Composite dropping 2.8% before closing 2.6% lower.
- Investors worry about the heavy debt AI companies are incurring to finance data center expansions, as capital expenditures far exceed operating cash flow, increasing reliance on equity and debt markets that are becoming less supportive.
- The Brookings Institution estimates that developing AI infrastructure will require over $10 trillion between 2025 and 2032, representing the largest investment wave in U.S. history, surpassing previous major economic expansions.
- Despite some AI-driven companies remaining profitable, investors are reevaluating the sustainability of their growth amid soaring costs, contributing to market volatility.
- Mixed earnings reports from major firms like Meta Platforms and Tesla added to market uncertainty, with Meta’s profit missing estimates and Tesla reporting weaker-than-expected revenue despite strong profits.
