Nasdaq Falls Over 750 Points as Concerns Grow Over AI Investment Funding

The Nasdaq Composite Index fell 751 points, or 2.8%, to close at 26,009 on Thursday, reflecting heightened investor anxiety about the financing of artificial-intelligence projects. The broader S&P 500 declined 1.2%, and the Dow Jones Industrial Average recorded a marginal gain of less than 0.1%.

Analysts said the market is questioning whether AI-related capital expenditures, which are among the most capital-intensive in history, can be sustained given the growing reliance on equity and debt financing. > "AI growth is dependent on capex (this is one of the most capital-intensive industries ever), and since capex is dramatically outpacing operating cash flow, companies are reliant on the largess of equity and debt investors to underwrite all the spending, but lately those markets are becoming increasingly less accommodating," said Adam Crisafulli, head of Vital Knowledge, in a research note.

Crisafulli added that a tightening credit environment and slower debt issuance could limit firms' ability to fund the AI infrastructure buildout. The Brookings Institution estimates that developing AI infrastructure between 2025 and 2032 could require more than $10 trillion, a scale that would surpass historic U.S. investment waves such as 19th-century railroad construction and the dot-com boom, according to Carl Weinberg, chief economist at High Frequency Economics.

Despite strong profitability among leading AI players, investors are reassessing the cost implications as stock valuations rise. The market decline coincided with mixed earnings reports, including a 7% drop in Meta Platforms shares after revenue beat estimates but profit fell short, and a 3.1% decline in Tesla shares despite better-than-expected summer earnings but weaker revenue.