AI stocks drag Nasdaq down 2%; Brent oil tops $112

Meta and Tesla set the tone: Meta fell about 6% to 7%. Its third-quarter revenue rose 26% to $64.6 billion, but it spent $34.91 billion on capital projects in the quarter, and its free cash flow turned negative, at minus $2.12 billion, according to the company's own release. It also announced a new class of non-voting shares, which Reuters said would help fund its AI expansion. Tesla fell 1.9% in early trading after cutting its annual capital spending forecast, which Reuters said raised questions about the pace of its AI and robotics plans.

Oil added pressure: Brent crude rose 3.3% to about $112.41 a barrel and U.S. benchmark crude about 2.9% to $99.93, AFP reported, Brent's highest level since May, according to AP. The Wall Street Journal tied the jump to fresh Houthi strikes on Saudi Arabia and reports that the U.S. and Israel are planning renewed attacks on Iran. Investors moved into safer assets: the 10-year Treasury yield fell to about 5.01%, the Journal said, and consumer staples and health care stocks rose, Reuters reported.

By the numbers: 2.2%: the Nasdaq's late-morning drop (AP). $34.91 billion: Meta's third-quarter capital spending. Minus $2.12 billion: Meta's quarterly free cash flow. $112.41: Brent crude per barrel (AFP). 32.3%: the forecast S&P 500 third-quarter earnings growth, up from 30.7%, per LSEG data cited by Reuters.

The bear and bull case: Investors are weighing the soaring cost of AI investment against an unclear timeline for returns, Reuters reported. "The thing that makes these AI names more vulnerable is just that they have such high valuations already," Brendon Dashiell of Bogart Wealth told Reuters, adding, "We think markets will continue to be choppy, but we're still cautiously optimistic." On the other side, corporate profits are still growing fast, and weekly jobless claims unexpectedly fell, pointing to a solid job market, Reuters said. Meta CEO Mark Zuckerberg said in the company's release that "our investments are paying off, the core business is strong."

What's still unknown: Where stocks close Thursday, whether the drop deepens or fades like earlier AI scares, and whether Middle East supply fears ease. The Federal Reserve meets next week; Reuters said the jobless-claims data supports expectations that it will hold rates steady.

Stock and oil figures are intraday and moved during the morning: Reuters had the Nasdaq down 1.46% and the S&P 500 down 0.81% at 9:41 a.m. ET, and AP had them down 2.2% and 1.4% at 10:45 a.m. ET. Closing figures may differ. The hero photo shows the Nasdaq MarketSite studio in 2015, not Thursday's trading.