Closing Bell: Stocks Down on AI Concerns, Geopolitical Tension

U.S. stocks sold off Thursday despite upbeat earnings reports as tech stocks faced renewed concern about artificial intelligence spending. 

The S&P 500 (SPX) fell 1.21%, while the Nasdaq-100 (NDX) slid 2.9%. The Dow Jones Industrial Average ($DJI) finished essentially flat, while the Russell 2000 (RUT) rose 0.11% as yields fell, a boost for rate-sensitive small-cap stocks. 

The yield on the 10-year Treasury fell 19 basis points to 4.95%, its lowest close in over a month, as traders sought safety. WTI oil prices rose over 2% and settled above $99 a barrel with militant strikes on Saudi Arabian energy infrastructure and airports, and reports of potential post-election U.S. and Israeli plans for more strikes on Iran. 

Semiconductors led the market lower as mounting concerns over AI infrastructure demand and rising AI-related debt weighed on the group, sending the Philadelphia Semiconductor Index (SOX) down 6.7%. Meta Platforms (META) fell 7%, despite reporting better-than-expected results. Consumer Staples, Utilities, and Health Care were the session’s top-performing sectors. 

Here are a few things to watch from Thursday’s market action: 

Tesla (TSLA) Q3 Beat Across the Board, Free Cash Flow Surprises 

Tesla beat expectations on both the top and bottom lines, reporting revenue of $28.046 billion versus the $27.883 billion IBES estimate and adjusted EPS of $0.48 versus $0.43 expected. Free cash flow was the standout, coming in at $1.531 billion compared with expectations for a $4.921 billion outflow. Gross margin was 19.6%, operating margin was 2.6%, and automotive gross margin excluding regulatory credits reached 18.1%. However, Tesla lowered its capital expenditure guidance relative to Wall Street expectations, raising concerns that the company could be shifting its spending plans for AI-related investments. See TSLA Earning Signal Gear Shift in Growth Through FSD, Cybercab & Optimus  

Meta Revenue Beat Overshadowed by $9.89B Legal Charge 

Meta reported revenue of $64.6 billion, topping the $63.37 billion IBES estimate, with advertising revenue contributing $63.06 billion, or roughly 97.6% of the total. EPS of $3.83 missed the $5.46 consensus estimate due to a $9.89 billion charge tied to the August teen mental health settlement with 52 state attorneys general. Quarterly capex of $34.91 billion pushed free cash flow to negative $2.12 billion, highlighting the impact of elevated investment spending. Meta also announced a one-time stock dividend of one non-voting Class C share for each Class A and Class B share, effective January 2027. See KG on META Failing to Lift Stock Market, Crude Oil Nearing $100 and Meta’s Earnings Report: New C Shares, Muse Details 

Spotify (SPOT) Subscriber Beat and Stronger Q4 Profit Guidance Lift Shares 

Spotify’s revenue slightly missed analyst expectations, but stronger guidance from management helped lift the stock during the session. Premium subscribers reached 306 million, topping the company’s own guidance by 1 million. Margins narrowed modestly versus prior quarters this year, which the company attributed to temporarily elevated marketing and cloud and AI spending. The CFO expects advertising revenue growth to continue improving toward double-digit levels. See Thursday's First Moves: AAL Falls, SPOT Surges, LMT Rallies After Earnings

This material is intended for informational purposes only and should not be considered a personalized recommendation or investment advice. Investors should review investment strategies for their own particular situations before making any decisions.

Schwab Network is brought to you by Charles Schwab Media Productions Company (“CSMPC”). CSMPC is a subsidiary of The Charles Schwab Corporation and is not a financial advisor, registered investment advisor, broker-dealer, futures commission merchant, or forex dealer member.

Charles Schwab Media Productions Company and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions.

Data contained herein is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. All events and times listed are subject to change without notice.