OpenAI revenue disappointment hits AI stocks, sending Nasdaq 100 down more than 1%
Reports that annualized revenue at one of the leading U.S. AI labs was $20 billion below expectations had a “cascading effect” on chipmakers and other AI-linked stocks
Just two days ago, the S&P 500 and Nasdaq Composite hit fresh all-time highs amid a renewed wave of enthusiasm about AI / Photo: X / NYSE
The tech-heavy Nasdaq Composite and the narrower Nasdaq 100, which comprises the shares of the 100 largest companies by market capitalization listed on the exchange, lost 1.2% and 1.4%, respectively, on Thursday. Tech stocks came under pressure after reports that OpenAI’s annualized revenue of $50 billion was around $20 billion below market expectations. The Financial Times reported the figure during the day.
“Investor concerns about OpenAI’s revenues were having a ‘cascading effect’ across chips and the AI trade,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, told MarketWatch. The Philadelphia Semiconductor Index fell 3.4% on Thursday. Oracle shares dropped more than 5%, while chipmakers Nvidia and Advanced Micro Devices lost almost 3% and 4%, respectively.
The decline in tech stocks also weighed on the S&P 500, with the broad U.S. equity benchmark down almost 0.5% for the day. The selloff triggered by the OpenAI revenue report is a reminder to diversify beyond tech stocks, Zaccarelli said.
Just two days earlier, the S&P 500 and Nasdaq Composite hit fresh all-time highs amid a renewed wave of enthusiasm about AI. Now, “investors are becoming a bit skeptical about how long this huge AI spending can last with borrowing costs rising in a significant way,” according to Matt Maley at Miller Tabak, as quoted by Bloomberg.
Not everyone in the market shares that view. “We retain strong conviction in the AI growth story, and believe AI-related investment remains a powerful tailwind for the broader equity market,” Ulrike Hoffmann-Burchardi at UBS Chief Investment Office wrote in a recent note. She nevertheless warned: “but the increasing concentration of market gains reinforces the importance of managing risk through a broadly diversified equity portfolio.” This is particularly relevant to AI, where it is not yet clear how value creation will ultimately be distributed among chip designers, cloud providers, model developers, and application companies, she added.
