A report that OpenAI makes less money than investors thought hit the AI trade. Chip stocks fell the most.
Driving the news. The Financial Times reported that OpenAI’s annualized revenue is about $20 billion below earlier estimates. That pulled down the companies that build and supply its data centers, including Oracle (−5.5%), Micron (−4.8%) and Broadcom (−4.4%).
Why it matters. The AI trade assumes OpenAI and its peers can pay for the chips and data centers they have ordered. Less revenue makes those orders harder to fund. A day earlier, the Wall Street Journal reported that Broadcom is lining up $50 billion in financing for OpenAI, which raised fears that AI spending now runs on debt.
Yes, but. The selloff stayed in tech. The Dow rose 0.1%. Oil jumped on Middle East tensions, which added to worries about inflation and another Fed rate hike.
The big picture. Chip stocks are still up more than 80% this year, and the Nasdaq set a record close on Tuesday.