by Coinstrooper Crypto Articles
Quick Take
  • Meta fell 7% as AI spending outran its cash flow, and MetLife’s Drew Matus says investors punish spending cuts too.
  • Yet third-quarter capital expenditure (capex) of $34.9 billion topped operating cash flow, and shares fell on Oct.
  • Four more tech giants face the same test after Meta’s selloff.
  • Microsoft and Alphabet report Wednesday, followed by Amazon and Intel on Thursday.

What Happened

Meta fell 7% as AI spending outran its cash flow, and MetLife’s Drew Matus says investors punish spending cuts too.

What Do Investors Actually Want From AI Spending?

Investors want proof that AI supports long-term growth, he said, yet debates over jobs and profits will persist.

Meta also announced a new class of nonvoting Class C stock. Scotiabank noted that management indicated an equity raise may be necessary.

The post Big Tech Earnings Are a No-Win Test as Investors Punish Both Capex Cuts and Hikes appeared first on BeInCrypto.

Market Context

Meta beat revenue estimates, with sales up 26%. Yet third-quarter capital expenditure (capex) of $34.9 billion topped operating cash flow, and shares fell on Oct. 22.

Matus said firms that cut capex get punished. Firms that raise it get the same treatment.

Alphabet fell about 4% after hours in July when it lifted capex guidance. BeInCrypto’s filing review found AI capex draining cash at Microsoft and Amazon.

Matus argues AI drives capex, equity gains and consumer spending at once. He called that economic concentration more worrying than the stock market’s.

Why It Matters

Matus expects Warsh to skip a move and revisit policy in December.

One weak outlook from a single company could therefore test that whole chain.

Details

Four more tech giants face the same test after Meta’s selloff. Microsoft and Alphabet report Wednesday, followed by Amazon and Intel on Thursday.

Bloomberg’s hosts said the four make up about 15% of the Nasdaq 100, which has fallen roughly 7% this month.

“I don’t actually really know what people want from these people.”

Can Big Tech Spend as Much as It Promises?

Matus doubted that headline budgets will turn into spending this year, since firms must find workers, equipment and land first.

However, he said industries most exposed to AI are hiring more people, not fewer.

The Federal Reserve (Fed) meets Oct. 27 and 28 in a packed Fed week. Its decision lands Wednesday afternoon, hours before Microsoft and Alphabet are due to report.

The Fed raised rates in September to a 3.75% to 4% range. Traders scaled back October hike bets after Chair Kevin Warsh said hotter inflation had not changed his view.