US stocks experienced a decline on Monday, September 28, with the S&P 500 falling approximately 0.8% and the Nasdaq Composite dropping about 0.92%. This broad market sell-off, particularly impacting tech stocks, occurred despite several positive announcements from major tech players. For instance, Nvidia's shares gained 1.6% after the company authorized a significant $150 billion share repurchase, the largest in US market history. Additionally, Meta launched an enterprise AI platform, and AMD announced an $8.2 billion all-stock acquisition of World Labs.
The decline in the broader market was attributed to rising oil prices driven by events in Iran, which in turn fueled inflation concerns and higher Treasury yields. The 10-year Treasury yield climbed to 5.22%, its highest since 2007, and Fed funds futures priced in a 70.3% probability of an October interest rate hike. This environment created a challenging backdrop for equities, overshadowing company-specific positive news.
Adding to the tech sector's woes, Goldman Sachs issued a cautious outlook on AI investments, indicating that hyperscalers like Amazon, Oracle, and Microsoft would need to generate approximately $300 billion in annual AI revenue to merely break even on their substantial investments. This figure is significantly higher than the current annualized cloud revenues, which are about $70 billion above the pre-AI trend as of Q2 2026. Furthermore, Goldman estimates that AI users would need to spend around $1 trillion annually on AI applications for hyperscalers to achieve solid returns, with AI infrastructure capital expenditures for the five largest US hyperscalers projected to reach $1.2 trillion in 2027, exceeding earlier consensus estimates.
Individual tech companies also faced specific challenges. Oracle received a downgrade to 'sell' from Seeking Alpha due to renewed credit risk and concerns over its Project Jupiter, which has about half of Oracle's $664 billion backlog tied to OpenAI. The company's use of a force majeure notice for Project Jupiter and potential regulatory delays on revenue conversion raised red flags. Oracle's CapEx for FY27 is projected to be between $90 billion and $95 billion, with expectations of even higher spending due to rising component costs. Meanwhile, Meta Platforms experienced a 6% pullback from its Thursday close, with its stock opening lower on Monday. Despite strong revenue growth, Meta's Q2 capital expenditures nearly doubled to $31.1 billion, leading to a 91% drop in free cash flow to $784 million and an 8% decline in operating income, as the company poured significant investments into data centers, servers, and AI chips.
