Tech stocks retreated on Thursday following a news report indicating that OpenAI’s annualized revenue is roughly $20 billion lower than previously estimated.
OpenAI, the developer of ChatGPT, recently informed investors.
This discrepancy could unsettle investors who are already questioning whether AI demand will be sufficient to help companies like OpenAI and Anthropic achieve profitability and justify the industry’s massive capital expenditure on AI infrastructure.
The Nasdaq Composite declined 1.25%, marking its worst performance since mid-August. The S&P 500 dropped 0.5%, dragged down by weakness in the technology sector. While the indexes opened lower, the losses intensified following the publication of the FT report midday.
The confusion likely stems from a desire by firms to compare OpenAI’s figures with those of Anthropic, which includes gross revenue from cloud providers, whereas OpenAI’s data is based on net revenue.
OpenAI declined to comment.
Selling pressure was observed across semiconductor manufacturers, cloud providers, and other tech firms involved in the AI buildout. Nvidia (NVDA) fell 2.9%, Intel (INTC) dropped 5.3%, and Oracle (ORCL) slid 5.5%.
The outlook for many technology stocks relies on investor conviction that AI demand will continue to climb. If there are cracks in that narrative, such as OpenAI generating less revenue than anticipated, it could trigger negative consequences throughout the AI supply chain, said Ross Mayfield, an investment strategist at Baird.
“There are going to be tremors throughout all of the related sub-industries,” Mayfield said.
The stakes are currently higher because the stock market has been bolstered in recent weeks by gains in tech and AI equities, while other sectors have struggled under the weight of rising bond yields.
“This has become a much narrower market that’s dependent on the AI names to keep it afloat,” Mayfield said. “Certainly, this is going to hit that complex in a big way.”
OpenAI CEO Sam Altman announced in September that the company would delay its initial public offering until at least next year, citing concerns regarding AI safety.
Anthropic is anticipated to launch its IPO later this fall, reportedly aiming for a $2 trillion valuation. In August, Bloomberg and Reuters reported that the company is on track to generate annualized revenue exceeding $65 billion.
