Tech stocks experienced a notable downturn on Tuesday, following a report from The Wall Street Journal indicating that OpenAI, the creator of ChatGPT, is struggling to meet its revenue and user targets. This revelation has ignited concerns about the future viability of the tech industry’s substantial investments in artificial intelligence, which amount to trillions of dollars.
The declines in tech stocks were led by Japanese conglomerate SoftBank, which saw its shares plummet 10% during trading in Tokyo. SoftBank has committed a staggering $60 billion to OpenAI, making it one of the key stakeholders in the AI initiative. Other companies aligned with OpenAI were also affected, with CoreWeave, a cloud computing provider, dropping 6%, and Oracle falling by 4%. Notably, chipmaker Nvidia saw a reduction of approximately 3% in its stock price, despite having previously announced a contract with OpenAI potentially worth up to $100 billion, a figure later reported to have been revised down to a maximum of $30 billion.
The broader Nasdaq composite index, largely composed of technology firms, fell by 1% as concerns about OpenAI’s standing weighed heavily on investor sentiment. While NBC News has yet to verify the Journal’s reporting, the article suggested that some OpenAI executives are apprehensive about the company’s business future as it approaches an initial public offering, a move that would necessitate public financial disclosures.
In response to the article, OpenAI has dismissed the claims as “clickbait,” asserting that the company remains robust and is experiencing substantial growth across consumer, enterprise, and developer segments. Steve Sharpe, OpenAI’s head of business and financial communications, emphasized the company’s “extremely steep growth curve.”
OpenAI is deeply integrated into a complex network of relationships that underpin the ongoing AI boom, which has significantly lifted the stock market. Analysts have expressed concern that weaknesses in a pivotal player like OpenAI could trigger a cascading effect that threatens the broader AI ecosystem. Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, noted in a Tuesday memo that he considered OpenAI “too big to fail” due to its extensive reach across the data center environment.
As major tech firms prepare to announce their quarterly earnings on Wednesday, market analysts caution that investors are particularly sensitive to potential disappointments, especially in a climate where earnings expectations are escalating faster than stock prices. Dennis Follmer, chief investment officer at Montis Financial, highlighted that any unfavorable developments related to AI demand or capital expenditure from prominent tech companies could prompt a reassessment of the market’s recent gains.
Despite the challenges, CoreWeave maintained a positive outlook, emphasizing its partnerships with other tech giants like Google, Microsoft, and OpenAI rival Anthropic. The company reaffirmed its commitment to its collaborations while highlighting that OpenAI is one of several strategic partners. Representatives from Oracle and Nvidia did not provide immediate comments following the stock market dip.
