Micron stock fell on Thursday as rising oil prices and worries about AI spending weighed on chip stocks. Investors are asking whether higher borrowing costs could slow orders from the companies building AI infrastructure.
Micron Technology stock fell 6.3% on Thursday, Oct. 22, as rising oil prices and concerns about AI spending dragged on chip stocks. The S&P 500 and the Nasdaq Composite were down 1.2% and 2.6%, respectively.
Oil and AI funding concerns hit chip stocks
Brent crude topped $112 a barrel after attacks in Saudi Arabia raised concerns about further disruptions to energy supplies. The ongoing war has choked oil and gas flows from the region, and prices have risen from around $72 just before the conflict began.
High oil prices help fuel inflation across the economy, which in turn can keep interest rates and borrowing costs elevated. Treasury yields fell Thursday but remain well above prewar levels. For companies in a high-growth, capital-intensive industry like AI, that financing pressure makes investors nervous.
Micron faces risk if AI builders struggle to pay
For Micron, the concern is what happens if the companies building AI infrastructure have more trouble paying for it. Higher borrowing costs could lead to a slowdown in orders for the chipmaker and curb the growth supporting its stock price.
Meta Platforms gave investors more reason to question how the AI build-out will find enough funding. Its Q3 report showed no signs of a capex slowdown, but the company reported negative free cash flow for the first time since 2012. It also outlined plans to raise money through a new class of stock.
The decision to lean on equity sales instead of debt could signal that lenders are getting less willing to extend credit, according to the source. It could also mean the math isn't penciling out the way it once did.
Source: The Motley Fool
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