Rising oil prices and AI spending doubts weigh on tech stocks

In short: Markets are getting jumpy as oil prices rise and investors question whether expensive AI building projects will deliver profits.

What's going on

Oil prices are climbing again, and that is bringing back worries about inflation. On October 22, Brent crude rose above $113 a barrel, near a five-month high, on fears that Middle East disruptions could limit supply. Stocks fell the same day, with the S&P 500 down 1.2% and the Nasdaq down 2.6%.

At the same time, investors are taking a harder look at the cost of building out artificial intelligence. This includes data centers (large buildings full of computers that run AI) and the chips that power them. The conversation is shifting from “how fast can this grow” to “who pays for it and how long until it pays back,” especially now that borrowing money is more expensive.

Some recent company moves have added to the unease. Meta’s plan for new non-voting shares put attention on how much cash its AI push could require. Tesla’s lower forecast for capital spending also raised questions about the pace of its AI and robotics plans. Debt worries have also touched AI infrastructure firms such as CoreWeave.

What to watch

Higher energy costs and higher interest rates can squeeze company profits and make long-term projects harder to fund, like trying to renovate a house when both materials and loan payments get more expensive. Still, this market wobble is a sign of uncertainty and not proof that demand for AI has collapsed. Watch whether oil prices stay high and whether companies can show clearer timelines for earning money back from their AI spending.

Source: NYTimes