What’s News in Markets: Meta’s AI Bill, IBM’s Comeback, Musk Explores Merger

Host Imani Moise opens the October 24 edition by saying that AI spending dominated the week’s markets and that investors were increasingly anxious about whether the technology will generate enough returns to justify the enormous costs. The Wall Street Journal obtained an exclusive look at a draft IPO filing for Anthropic, the company behind the Claude chatbot. The filing suggested that one of the year’s most anticipated public offerings could be approaching and showed that Anthropic’s revenue had grown nearly 15 times compared with the first half of the previous year. The same filing also indicated that Anthropic could spend as much as $750 billion on computing power over the next several years. That figure intensified Wall Street’s concern about the economics of AI: rapid revenue growth is evident, but so is the potentially vast amount of capital required to support it. Elsewhere in the technology industry, SK Hynix abandoned plans to list its memory-chip subsidiary in the United States, citing market conditions. Broader markets were also affected by rising oil prices amid continuing conflict in the Middle East. Brent crude futures climbed 6.2% to $116.72 a barrel. For the week, the tech-heavy Nasdaq fell 0.7%, the S&P 500 declined about 0.5%, and the Dow was the only major major index to finish higher, gaining 0.4%.

Moise then turns to Meta, whose shares fell 9.4% for the week despite the Facebook parent reporting record third-quarter revenue. Investors focused less on the company’s $64.6 billion in quarterly revenue than on the amount it has committed to its AI infrastructure. Meta disclosed roughly $825 billion in future leases and non-cancellable contracts connected to its AI build-out, up from nearly $700 billion in July. The spending has already affected cash generation: Meta’s free cash flow turned negative for the first time since the company went public. Executives told analysts that the company intends to continue spending aggressively, so the issue is not merely a temporary increase in capital expenditure. Meta also announced a two-for-one stock split that will create a new class of shares. The company could eventually sell more of those shares to raise money for AI while preserving CEO Mark Zuckerberg’s control, because the new shares would have no voting rights. Meta’s decline reflected a wider investor pullback from expensive AI bets. Alphabet ended the week down about 6%, and the Philadelphia Semiconductor Index—which includes chipmakers such as Nvidia and Micron—fell 3.2%. The market reaction suggested that investors are becoming more reluctant to finance the AI boom without clearer evidence that the investments will pay off.

IBM bucked the technology selloff and was the best-performing stock in the Dow, rising 9.2% during the week. The century-old technology company reported stronger-than-expected earnings on Wednesday, a sharp reversal from July, when its shares suffered their worst decline ever. At that time, IBM had warned that delayed customer deals would weigh on its results. Those deals began to come through in the third quarter. IBM said about two-thirds of the delayed deals closed during the period, helping the company increase revenue by roughly 5%. The improvement gave investors a concrete reason to view IBM differently from companies whose AI spending is being judged primarily as an escalating cost. The most revealing part of the earnings report, however, was CEO Arvind Krishna’s discussion of AI economics. Krishna told analysts that large companies are becoming more concerned about whether their AI investments are actually producing worthwhile returns. In the episode’s framing, IBM’s performance showed that established technology companies can benefit when postponed business materializes, while its CEO’s comments reinforced the broader market concern: enterprise customers may be reaching a point where they demand proof of value before committing to more AI spending.

Tesla and SpaceX both reported earnings, but the results were overshadowed by Elon Musk’s announcement that the two companies had formed special committees to consider a potential combination. No agreement has been reached, and any transaction would require shareholder approval as well as regulatory review. The companies together are worth roughly $3.5 trillion, making a deal unusually large and far from certain. Moise notes that Tesla makes electric vehicles while SpaceX launches rockets, but says their operations are already surprisingly intertwined. The companies share employees, technology, and other resources, so a formal tie-up would build on existing connections rather than join completely unrelated businesses. The size of the proposed combination, however, would make scrutiny unavoidable. SpaceX shares finished the week up 1% after the company reported that quarterly revenue had more than doubled from the prior year, helped partly by its growing AI business. Tesla shares gained nearly 5%. Tesla managed to produce positive free cash flow even while making substantial investments in AI and robotics. Thus, both companies’ market performances were positive, but the possible merger—not the earnings reports alone—became the central story.

Moise concludes that the major market story was not simply whether companies were growing, but whether investors believed their AI spending could eventually generate sufficient returns. Anthropic’s rapid revenue expansion was paired with a possible $750 billion computing bill. Meta’s record revenue was overshadowed by negative free cash flow and roughly $825 billion in future AI-related leases and contracts. IBM, by contrast, benefited from delayed deals finally closing and offered a warning that large customers are scrutinizing the returns on their own AI investments. The week’s index performance reflected that tension. The Nasdaq and S&P 500 slipped, while the Dow rose modestly, helped in part by IBM’s rally. Oil’s rise to $116.72 a barrel added another source of investor anxiety, and the planned but uncertain Tesla-SpaceX combination introduced a separate question about how Musk might organize and finance his companies. The host directs listeners to the Wall Street Journal’s live markets coverage for more stocks moving on the week’s news. The episode ends with Moise signing off until the following Saturday.