The Nasdaq index fell 1% on news of a possible postponement of OpenAI's IPO

The Nasdaq 100 Index, considered a barometer of the technology sector, led the decline among the major U.S. stock market indices at the opening of trading on Friday.

— The Nasdaq 100 Index was down 1.1% after the start of the main trading session.

— The S&P 500 broad-market index was down 0.7%.

— The Dow Jones Industrial Average, a blue-chip index that includes fewer technology companies, fell 0.3%.

This week turned out to be extremely nerve-wracking for investors: sentiment surrounding the tech sector—which until recently had seemed unshakable—shifted sharply, plunging markets first into euphoria and then into a correction, according to Bloomberg. According to Bank of America, investors withdrew more money from U.S. stocks this week than they invested for the first time in three months. Tech stock funds, which led the outflows, lost a record $9.3 billion.

Another wave of sell-offs in tech stocks on Friday followed news of price hikes for Apple and Microsoft products, which raised concerns among investors about the sustainability of demand for chips, according to Bloomberg. Shares of Micron and Apple fell by more than 6%.

An article in The New York Times reporting that OpenAI, the developer of ChatGPT, might postpone its planned IPO from this year to next has put additional pressure on the sector. This news casts doubt on the public market’s willingness to absorb shares of overvalued AI companies, writes Investing. The combination of sky-high valuations and colossal capital expenditures financed by debt—with almost no tangible return on investment—is forcing investors to conduct a massive reassessment of the entire sector.

"The technology sector remains overloaded in terms of positioning, and this makes it more sensitive to negative news or sharp movements in individual stocks," noted Francisco Simon, a strategist at Santander Asset Management.

The past week has shown that the investment thesis surrounding artificial intelligence remains valid, though the phase of one-sided growth appears to be behind us, according to Bloomberg. The most sensible strategy right now is to “carefully diversify portfolios across geographies, investment styles, company sizes, and sectors,” says David Manso, Chief Investment Officer at CaixaBank AM.

“Earnings season kicks off in a couple of weeks, and leading indicators are showing encouraging trends. We expect corporate earnings to serve as a positive catalyst,” he said.

This article was AI-translated and verified by a human editor