Advanced Micro Devices fell 8.1% on Thursday as oil prices jumped on renewed Middle East conflict. Higher borrowing costs could make the enormous AI infrastructure build-out harder to fund.
AMD stock fell 8.1% on Thursday, Oct. 22, as oil prices jumped amid renewed conflict in the Middle East. The broader market also dropped, with the S&P 500 losing 1.2% and the Nasdaq Composite 2.6%.
Oil adds pressure to an expensive build-out
Renewed attacks in Saudi Arabia from Houthi rebels raised fears of further disruptions to oil supplies. Separately, Brent Crude topped $112 a barrel on Thursday, the highest level since May of this year.
High energy prices threaten to drive already elevated inflation even higher. That makes the outlook for borrowing costs more complicated.
Meta's report puts AI financing back in focus
The AI infrastructure build-out is expensive and is more and more fueled by debt as big tech sees its cash flows diminish. Meta Platforms' Q3 report showed aggressive capital spending continuing.
That led to negative free cash flow for the first time since 2012. There is no sign of spending slowing down today, but the concern is whether the current pace is sustainable if borrowing costs continue to rise, and how that will affect AMD's bottom line.
Meta's earnings also included another factor. The company approved a new non-voting share class explicitly to be used to raise capital without diluting CEO Mark Zuckerberg's voting power.
Source: The Motley Fool
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