Nasdaq Falls 2.6%, Its Worst Day Since June, as Meta Drops About 7% After Raising Its AI Spending Outlook

Meta Beat Revenue Forecasts and Still Lost About 7%

On Thursday, Oct. 22, 2026, the Nasdaq Composite fell 2.6% to 26,008.86. It was the index's worst day since June^[3]. The S&P 500 lost 93.74 points, or 1.2%, to close at 7,663.43. That was its worst day since July. The Dow Jones Industrial Average finished nearly flat, up 11.89 points at 52,867.98^[2].

The sharpest single drop came from Meta Platforms. Its shares closed down about 7%, at $648.85. An earlier Reuters story, written during the session, had the loss at 6.7%^[11]. A supply-chain warning from chip-equipment maker Lam Research also weighed on tech stocks.

Here's the odd part. Meta had just reported a strong quarter. Revenue was $64.60 billion, up 26% from a year earlier. Analysts had expected about $63.37 billion^[1][5]. The market sold anyway.

The Cash Gap Behind the Selloff

The reason is in the cash numbers. Meta spent $34.91 billion in the quarter on capital expenditures. That's money for long-lasting things like data centers and chips, mostly for artificial intelligence^[1]. Its operating business brought in $32.79 billion in cash.

Free cash flow is the second number subtracted from the first. It's what a company has left after paying to build. For Meta it was negative $2.12 billion. A year earlier it was positive $10.6 billion^[5][19].

When free cash flow turns negative, a company has three choices. It can use savings, borrow, or sell stock. Meta also raised the low end of its 2026 spending range. It now expects $135–145 billion, up from a previous low end of $130 billion^[1][5].

Meta said its estimate of future spending commitments is now about $825 billion^[5]. That's up from $700 billion in July. Analysts already model roughly $193 billion of capex for 2027^[19].

A New Share Class and Who Controls It

Meta also announced a new kind of stock. The board approved a non-voting "Class C" share. Holders of Class A and Class B shares will get one Class C share for each share they own. The new charter is expected to take effect Jan. 19, 2027^[5][14].

Many outlets called this a stock split. The economic effect is similar: twice the shares, each worth about half as much^[1][13]. But the share is different in one key way. It carries no vote.

Meta already has two classes. Class A gets one vote per share. Class B, held mostly by Mark Zuckerberg, gets ten. That's how he holds about 60.6% of the votes while owning about 13.4% of the company^[13].

The new shares could let Meta raise cash, or pay staff, without diluting that vote^[14]. Meta's board committee says this keeps its "founder-led" model while opening a new funding route^[1]. Critics see something else. They say it separates the money from the control. If the AI bet fails, outside holders bear most of the loss but had no vote on it^[13].

A Founder Alignment Agreement adds to that concern. It lets Zuckerberg sell up to 20% of the Class C shares he receives without losing any voting power^[13]. Critics have little leverage, though. His controlling vote means outside holders can't block the plan^[13].

Two Readings of the Same Red Number

Skeptics say the line has been crossed. For the first time in years, Meta's investments used more cash than its business made. So the spending is no longer paid for out of profits^[5]. Some compare the moment to the fiber-optic boom of the late 1990s, when capacity grew faster than demand. The selloff spread to Nvidia, Amazon and chipmakers, which suggests the worry isn't about Meta alone^[11][17].

Bulls answer that negative free cash flow in a build-out is a choice, not distress. A data center costs money now and earns it back over many years. Think of a homeowner paying for a new roof up front. Meta's sales and operating cash flow are still growing fast^[1][5]. And the selloff came on a revenue beat of more than $1 billion^[5].

Meta's management makes the same case. CFO Susan Li said the investments produce "substantial incremental advertising revenue" through better ad targeting and engagement^[19]. Zuckerberg calls "personal superintelligence" both the mission and the next business. He said more than 10 million people in the U.S. and Canada set up Muse AI agents in about six weeks^[19].

Underneath both views sits a race. Meta, its big-tech rivals and Tesla each fear that falling behind could lock them out of the next computing platform^[15][17]. That pressure pushes spending up whatever any one quarter returns. The question is whether the new equipment earns more than it costs over its life. Nobody can answer that yet.

Tesla Went the Other Way and Fell Too

Tesla makes the puzzle harder. It reported adjusted earnings of 48 cents a share, against 43 cents expected. Revenue was $28.05 billion^[8][9]. Yet its shares closed down about 3.1%, at $374.58. Reuters had reported a 1.9% loss earlier in the session, and other reports put it near 2%^[11][12][19].

Tesla also moved opposite to Meta on spending. It cut its 2026 capital spending forecast from more than $25 billion to about $20 billion^[10]. Some investors read that as a sign its AI and robotics plans might slow^[12].

Tesla frames it differently. Third-quarter spending was $4.7 billion, against $7.5 billion analysts expected. That points to timing, not retreat^[10]. Tesla also says Optimus robot production has started^[9]. Its GAAP net income did fall to $787 million from $1.37 billion a year earlier, a drop of about 43%^[8][9].

So Meta was punished for raising spending and Tesla for cutting it. Investors seem to be weighing spending against expected returns, not spending alone^[10][12].

Rates, Oil and How the Press Told It

Other forces were in play. The 10-year Treasury yield had been near 5% before Thursday. Higher rates make future AI profits worth less today. They also make borrowing for data centers costlier^[23]. Investors bought Treasuries, and the yield fell to about 4.97%^[3]. Oil also rose on geopolitical tension^[4].

Coverage split by outlet. Reuters mostly gave exact moves in neutral terms^[11]. CNBC named two causes, AI spending and oil, rather than blaming Meta alone^[4]. The New York Post described "anxiety" over Zuckerberg's "lavish" AI spending. That word judges the spending rather than describing it^[16].

Semafor and TechCrunch led with control, saying the new stock lets Zuckerberg fund AI without losing his grip^[13][14]. Fortune stressed that billions in settlements and skyrocketing AI costs squeezed profit^[15]. India's Business Today ran a plain cause-and-effect story on the 7% slide. It left out the governance angle^[7].

This search found no New York Times, Washington Post or Guardian story, so that part of the spectrum is missing. The story is still developing. Meta must now show that its spending turns into revenue. It also must show how it will pay for $825 billion in commitments: from cash, from debt, or from Class C shares^[5][16].