U.S. stock futures hovered near flat levels on Friday following a sharp decline in technology shares, raising questions about the capital available to fund the rapid expansion of artificial intelligence infrastructure. The Nasdaq Composite had slumped by 2.6% on Thursday, marking its worst single-day performance since June. Analysts at Deutsche Bank noted in a client report that recent market volatilities had converged simultaneously, creating a distinct risk-off environment.
The primary driver of investor anxiety is the financing required for Silicon Valley's AI buildout. Meta Platforms, which has outlined plans to spend hundreds of billions of dollars on AI capabilities, announced a new class of shares partly to raise funds for these ambitions. This move, combined with mounting debt loads among major tech firms, triggered fears that stock dilution could depress share prices. Meta's stock price dropped 7%, its steepest decline since July. Jensen Huang, CEO of Nvidia, told CNBC that there is a "scarcity of capital" for AI development, stating that demand for funds far exceeds availability. Nvidia shares and those of Advanced Micro Devices both retreated, while a semiconductor industry tracker fell by 6.7%. Yardeni Research analysts observed that free cash flows at these companies have turned negative, forcing them to borrow and raising concerns about whether returns will justify the massive investments.
Western Digital shares fell by more than 6% in extended hours trading despite reporting strong quarterly results. The data storage provider, whose hard drives and memory chips are central to AI systems, saw its blended average selling price per terabyte rise by 28% during its fiscal first quarter due to intense demand and product shortages. Revenue surged to $4.38 billion and profit reached $1.78 billion, both figures exceeding Wall Street estimates. However, the stock, which had climbed more than 88% earlier in the year, continued to drop on Friday as investors rotated away from AI-linked names.
Oil prices also rose amid escalating geopolitical tensions in the Middle East. Reports indicated that the U.S. and Israel are considering new attacks on Iran following the November midterm elections, with Tehran threatening retaliation against economic and civilian targets. Additionally, Houthi militants in Yemen continued attacks on Saudi Arabia, prompting Saudi Aramco to order the evacuation of its headquarters in Dhahran near Bahrain. By 03:40 ET, Brent crude futures gained 0.8% to $114.01 per barrel after hitting a five-month high of $113.17 on Thursday.
In a related development, SK Hynix shares declined as the company put on hold plans for a U.S. initial public offering of its subsidiary Solidigm. SK Hynix cited concerns over market conditions and shareholder value in a regulatory disclosure. Solidigm, which manufactures NAND flash memory and solid-state drives, had been exploring financing options to expand production capacity. The company stated it decided to discontinue its review of a potential pre-IPO and IPO after comprehensively considering capital market conditions. Prior reports suggested Solidigm was considering a pre-IPO fundraising round of approximately 5 trillion won ($3.8 billion).