Meta and Tesla Lay Bare Stock Market’s Biggest AI Puzzle

The artificial-intelligence spending binge is a serious enigma for the stock market.

Traders view it through a negative lens but haven’t really got the measure of it yet.

The Barron’s Daily

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Meta Platforms hiked its capex guidance as the social-media giant’s earnings laid bare the costs of growing its Muse AI agent. It’s even creating a new share class to fund its spending. The stock is under pressure.

In contrast, Tesla cut capex, but that may raise questions over its robotics ambitions. Again the stock is being punished. It’s a lose-lose.

The market is generally just in a punishing mood. Semiconductor equipment maker Lam Research delivered record revenue and earnings but the stock fell sharply —that’s exacerbating the chip sector’s losses. IBM ’s earnings beat also prompted a slump in the stock.

The bond market is rallying too, pointing to more concerns over the AI growth story.

If the stock market has become allergic to AI spending hikes, then the rest of earnings season could be very tough going.

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📈 Here’s what’s happening in markets today:

• Stock futures tumble as AI spending fears reignite.
• Tesla, SpaceX, Meta, IBM, and more stocks that explain today’s market.
• Micron stock falls but don’t worry, it will triple from here says analyst.
• Chip stock rebound comes undone after Lam Research stokes spending fears.
• Tesla missed profit targets. Musk’s bold forecast can’t save the stock.
• Honeywell Technologies posts another solid quarter. It’s off to a good start.
• Lockheed Martin’s business is booming as backlog hits nearly $300 billion.
• Nvidia stock falls in a case of bad timing over another potential AI investment.
• Spotify stock rallies after earnings because not all AI winners are chip plays.
• Western Digital stock has nearly halved —and earnings could spark a comeback.

Created with Highcharts 9.0.1Source: FactSetNote: futures contractsAs of Oct. 22, 9 a.m. ET

Created with Highcharts 9.0.1Dow industrialsS&P 500Nasdaq Oct. 21Oct. 22-2.25-2.00-1.75-1.50-1.25-1.00-0.75-0.50-0.250%

🚗 Tesla is hopefully on the cusp of significant AI earnings

Tesla’s earnings report showed a company hopefully on the cusp of significant AI-driven earnings. Operating profit was weaker than expected, as tech spending ramps up. But more people are using autonomous driving technology—and Tesla’s robo-taxi business could be profitable in the second half of 2027. Read more here.

🤖 Meta earnings show how much future growth will cost

Meta Platforms’ solid third-quarter earnings come at what may be a turning point for the company and its AI strategy, and mounting expenses are weighing heavily on its profitability. Third-quarter capital spending was lower than expected, but free cash flow still went negative. Read more about its earnings here.

🌐 IBM earnings spark comeback hopes

IBM’s third-quarter earnings helped it take a step toward rewriting its narrative, though Wall Street sees a long road ahead. Revenue gains were most pronounced in IBM’s software segment, where sales rose 8% to $7.8 billion and beat expectations. Read more about results here.

🍼 Abbott to shed its struggling nutrition business in spinoff

Abbott Labs’ planned spinoff of its global nutrition business will create a stand-alone business housing brands such as Similac infant formula and Ensure nutritional supplements. The new company is expected to generate roughly $8.5 billion in annual sales. Read more about it here.

✈️ Southwest beats expectations but cuts profit outlook

Southwest Airlines reported better-than-expected quarterly earnings and revenue, and progress across its turnaround efforts, but the carrier again lowered its profit outlook because of rising jet fuel costs. CEO Bob Jordan said customers are responding to Southwest’s enhanced offering.

📰 Don’t miss out on our other newsletters

• Review & Preview: Here We Go Ag-AI-n
• Barron’s Tech: AI’s Battleground Stocks
• Global Signals: The Iran War Is Testing Saudi Arabia’s Economic Transformation

🪀 Mattel adds a director from its biggest shareholder

Mattel is adding a director to its board in an agreement with its largest shareholder as the struggling Barbie maker faces mounting pressure to consider a sale or other strategic changes. Lee Matheson is a partner at EdgePoint Investment Group, which holds an 18% stake. Read more about it here.

💬 Quote of the day:

I remain convinced Optimus will be the biggest product on Earth. — Elon Musk, Tesla’s CEO on the humanoid robot

Other headlines moving markets:

• Ebay’s latest layoff round shows it’s serious about a turnaround.
• Six Flags stock pressured after roller coaster tragedy. More turbulence is ahead.
• Texas Instruments earnings pass the test.
• Wall Street slashes Wingstop outlook ahead of earnings.
• What’s the ideal retirement withdrawal rate? These analysts have ideas.
• The real energy bottleneck isn’t crude, it’s fuel.
• How GM plans to win in the age of AI and EVs.
• How CoreWeave and neocloud stocks became AI’s battleground.
• As Chipotle battles softer sales, can higher prices lift the stock?
• Retail comebacks are rare. These stocks could be AI winners.
• Aevex’s drone-launching boats sunk by Navy, report says.
• Meta hit with $25 billion privacy penalty.
• Winnebago busts out of its rut despite higher fuel, interest prices.
• Pulte Group’s earnings are expected to drop. Watch for this.
• Options ETFs are booming. Beware of the tradeoffs.
• Healthcare costs are surging near 10%—and employees will feel the pain.
• Is it time for a new CEO at Bank of America?
• How Trump’s economy is working in 7 charts.
• What a Democratic Congress would mean for Wall Street.
• The Fed’s dilemma: Can markets damp inflation or is another rate hike necessary?

— Edited by Liz Moyer, Stacy Ozol, and Rupert Steiner

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