Wall Street opens lower amid geopolitical risks and earnings

Oct 23 · Morgan Stanley estimates AI capital expenditures will reach $1.6 trillion by 2027 Updated 10:15

CNBC reported that the Nasdaq fell 2.5% on Thursday and Meta Platforms saw a 7.5% decline. Meta Platforms reported negative free cash flow and disclosed a need to raise hundreds of billions of dollars, potentially through new Class C shares. Broadcom CEO Hock Tan highlighted challenges in raising sufficient capital for AI buildouts, and CNBC stated that a bond sell-off by CoreWeave illustrated the difficulty for neoclouds to secure debt. The Dow remained nearly flat as investors rotated into bonds and rate-sensitive stocks such as Home Depot and Kimberly-Clark, according to CNBC. The Guardian reported that the Nasdaq fell 2.6% and the S&P 500 dropped 1.2% on Thursday. The Guardian also reported that Brent crude oil prices rose 4% to $113.17 and U.S. Treasury yields fell as investors sought safer assets. CNBC reported that the 10-year Treasury yield fell below 5% for the first time since September 23, marking its largest one-day drop since March 2023. Additionally, CNBC reported that the U.S. and Israel may consider strikes on Iran after the November 3 midterm elections. Fortune reported that S&P 500 and Nasdaq futures declined alongside major indices in Asia and Europe, and that France's 10-year bond yields reached a 2002 high. Fortune also reported that Tesla shares fell after the company lowered its 2026 capital expenditures guidance, while SpaceX shares rose following an earnings beat and 2027 revenue guidance that exceeded analyst expectations. Middle East tensions included Houthi drone strikes on Saudi Arabia and Iranian attacks in the Strait of Hormuz, according to Fortune. Morgan Stanley estimates that AI capital expenditures will reach $1.6 trillion by 2027, with Nvidia as a primary beneficiary, Fortune reported.

The market's anxiety has shifted from a general fear of high spending to a concrete liquidity crisis. Meta Platforms' negative free cash flow and the need to raise hundreds of billions of dollars provide evidence that the AI boom is hitting a financial wall. The potential issuance of new shares suggests that even the largest players cannot fund this expansion through internal cash flow.

CNBC engaged with the core question of how investment doubts trigger a sell-off by linking executive warnings from Broadcom to the actual difficulty neoclouds face in securing debt. This connects high-level corporate strategy to the ground-level credit market, showing that capital scarcity is a systemic risk rather than just a valuation concern.

Investors are not exiting the market entirely but are rotating into safety. The flat performance of the Dow and the move toward rate-sensitive stocks indicate a flight to stability while the tech sector recalibrates its funding models.

Fortune expanded the scope of the instability by noting that the volatility extends to Europe, where France's 10-year bond yields reached a 2002 high. This suggests that while AI and oil are the primary triggers, the market is currently hypersensitive to any sign of fiscal instability [1].