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

Hey listeners, it's Saturday, October 24th. I'm Imani Moise for The Wall Street Journal, and this is What's News and Markets. Our look at the biggest stock moves of the week and the news that drove them. Let's dive in. This week's markets were dominated by AI. The Wall Street Journal got an exclusive look at a draft IPO filing for Anthropic, a sign that one of the most anticipated debuts of the year may be on the horizon. The filing showed the creator of the Clod Chatbot has managed to grow revenue by nearly 15 times compared to the first half of last year. But it also revealed that Anthropic could spend as much as $750 billion on computing power over the next few years. And Wall Street is already questioning whether AI will make enough to justify all that spending. Meanwhile, SK Heinix has scrapped plans to take its memory chips subsidiary public in the US, citing market conditions. Rising oil prices due to continued conflict in the Middle East also contributed to investor anxiety. Brent Crude futures rose 6.2% to $116.72 a barrel. For the week, the Tech Heavy NASDAQ lost 0.7% while the S&P 500 dipped about half a percent. And the Dow was the only major index to finish the week higher, at 0.4%. Let's start with one stock at the center of the AI spend debate, Meta. The Facebook parent reported a record amount of revenue in the third quarter. But its stock fell 9.4% this week, because investors were more focused on how much money was going out the door. The company disclosed roughly $825 billion in future leases and non-cancellable contracts tied to its AI build out. Up from nearly $700 billion in July. And even though it brought in a staggering $64.6 billion last quarter, its free cash low turned negative for the first time since the company went public. During the earnings call, Meta executives told analysts that they expect to keep spending aggressively. And now, they're getting creative about how to pay for it. The company announced a two-for-one stock split that will give existing shareholders a new class of shares. Meta can eventually sell more of those shares to raise money for its AI ambitions. But since the new class of shares don't come with any voting rights, those sales won't weaken CEO Mark Zuckerberg's control over the company. But the broader tech sell-off suggests investors are growing increasingly wary of putting the bill for the AI boom. Shares of fellow tech giant Alphabet ended the week about 6 percent lower. While the Philadelphia semiconductor index, which tracks chip makers including Nvidia and Micron, fell 3.2 percent. Not every tech stock got caught up in the sell-off. IBM was actually the best performer in the Dow this week, rising 9.2 percent. The Century Old Technology Company reported stronger than expected earnings Wednesday. That was a dramatic turnaround from July, when IBM Shares suffered their worst decline ever. Back then, the company warned that delayed customer deals would weigh on its results. Now, those deals are coming through. The company said about two-thirds of those deals close in the third quarter, hoping IBM grows revenue by about 5 percent. But perhaps the most interesting part of IBM's earnings was what CEO Arbind Krishna had to say about AI. He told analysts that large companies are becoming more concerned about whether their AI investments are actually paying off. And Tesla and SpaceX both reported earnings this week. But the results were overshadowed by news that two of Elon Musk's biggest companies are exploring a potential tie-up. On Tuesday, Musk said both companies have formed special committees to consider a deal. Nothing has been agreed to yet, but the combination would bring together two companies worth roughly $3.5 trillion. That's a lot of money, and any deal that size would face regulatory scrutiny. It would also need shareholder approval, so a deal is far from certain. Though one makes electric cars and the other launches rockets, their businesses are surprisingly intertwined. The two companies already share employees, technology, and resources. SpaceX shares finished the week up 1 percent after reporting that quarterly revenue more than doubled from last year. Filled in part by its growing AI business. Tesla ended nearly 5 percent higher. The company managed to generate positive recast flow, despite its heavy investments in AI and robotics. And now you know what's news in markets this week. You can read about more stocks that move on the week's news in our live markets coverage on WSJ.com. Today's show is produced by Michael LaValle, which is a supervising producer and Melanie Roy. I'm Umani Moise, have a great weekend, and see you next Saturday.