Micron Technology stock declined 6.3% on Thursday, October 22, as investors reacted to rising oil prices and growing concerns about the financing of artificial intelligence infrastructure. The drop occurred while the broader market also weakened, with the S&P 500 falling 1.2% and the Nasdaq Composite dropping 2.6% by the close of trading at 4:00 PM ET.
The sell-off in chip stocks coincided with a surge in energy costs. Brent crude, an international benchmark for oil prices, exceeded $112 a barrel following attacks in Saudi Arabia that raised fears of further disruptions to energy supplies. The ongoing conflict has restricted oil and gas flows from the region, driving prices up from approximately $72 per barrel before the conflict began to their current elevated levels.
Higher oil prices contribute to inflation across the economy, which can keep interest rates and borrowing costs elevated. Although Treasury yields fell on Thursday, they remain significantly above prewar levels. This financing pressure creates uncertainty for companies in high-growth, capital-intensive sectors like artificial intelligence. For Micron specifically, investors are focused on the potential impact if major AI infrastructure builders face difficulties funding their operations. Sustained high borrowing costs could lead to a slowdown in chip orders, potentially curbing the extreme growth that has supported Micron's recent stock performance.
Meta Platforms provided additional context for these funding concerns with its third-quarter report. While the report showed no signs of a capital expenditure slowdown, it revealed that the company posted negative free cash flow for the first time since 2012. Free cash flow represents the money remaining after operating expenses and capital spending are deducted. Meta also outlined plans to raise capital through the issuance of a new class of stock.
The decision by Meta to rely on equity sales rather than debt may signal that lenders are becoming less willing to extend credit or that previous financial projections are no longer viable. This shift in financing strategy adds to the broader market anxiety regarding how the AI build-out will sustain its funding needs.