AI panic is back on Wall Street.
Shares of Oracle, CoreWeave, SoftBank and other companies tied to OpenAI fell Tuesday, with all three falling at least 4% after the Wall Street Journal reported that the ChatGPT maker missed its own targets for revenue and users. This renewed investor concerns that tech giants’ heavy investments in artificial intelligence may not yield the huge profits many expect.
This report was particularly troubling just ahead of major AI players’ major earnings coming up this week. Alphabet, Amazon.com, Microsoft and Meta Platform are all scheduled to report on Wednesday, with Apple trailing on Thursday, which many expect to test a rally that has helped lift the major indexes to recent records.
Tuesday’s decline weighed on the Nasdaq Composite, sending the tech-heavy index back 0.9% from the previous session’s record high. Tech stocks were the biggest losers in the S&P 500, with the sector falling 1.3%.
“The ice is really thin. The leash is very tight,” said Dan Morgan, portfolio manager and analyst at Synovus Trust, which owns shares of OpenAI partners such as Oracle, Broadcom and Advanced Micro Devices. “Any evidence that comes to light that increases doubt about OpenAI, Anthropic or any of these companies is obviously going to cause a selloff.”
Morgan said he had not adjusted his position Tuesday and did not think investor concerns were widespread, as companies including IBM, Texas Instruments and Intel had reported strong earnings in recent days.
Instead, Tuesday’s losses were concentrated at the companies with the largest stakes in OpenAI’s business. OpenAI has formed close relationships with companies to secure funding and gain access to the computing resources needed to train AI systems and provide answers to questions and execute user requests. It has built a roster of corporate relationships from BNY Mellon to Target.
Oracle, Nvidia and SoftBank are among OpenAI’s closest partners, and some investors have come to see them as part of the AI leader’s ecosystem. Oracle has faced challenges in financing the OpenAI-linked data-center build-out. Nvidia is one of the largest financial supporters of OpenAI and has provided the processors used during much of OpenAI’s development. SoftBank has also been a central financier.
Oracle shares fell 4%. Top cloud-computing partner CoreWeave fell 5.8%. SoftBank, which has committed more than $60 billion to OpenAI, fell more than 9% in Tokyo trading – its worst one-day performance since November. Nvidia fell 1.6%, while Broadcom and AMD each fell more than 3%.
In some cases, OpenAI critics have stated that some financing arrangements are circular in nature, in which the company’s partner provides funding and the company spends the money on computing with that partner.
OpenAI has defended its financial position and said its leaders are united in securing computing resources.
“The business is active at all levels and the mood internally is incredibly positive,” the company said Tuesday in response to the Journal article.
OpenAI Chief Executive Sam Altman struck deals late last year worth hundreds of billions of dollars to commit computing resources, many of which failed to materialize as originally planned. Broad market sentiment on startups, which was once almost uniformly positive, began to deteriorate late last year.
The company has since moved to focus more directly on coding and enterprise customers, eliminating what one executive called “side projects” and launching ChatGPT 5.5, a model that has won praise from many power users.
Tech companies with less direct ties to OpenAI fared better on Tuesday. Microsoft gained 1%, while Apple added 1.2%. Software firms Adobe, Salesforce and ServiceNow all rose, a sign that concerns have not spread to other areas of the market where AI has caused volatility in recent months.
And Tuesday’s decline was relatively small. Energy shares in the S&P 500 rose 1.7%, boosted by Brent crude climbing to $111.26, its highest level since the US-Iran ceasefire. Consumer goods increased by 1%. The Dow Jones Industrial Average fell less than 0.1%, boosted by a 3.9% rise from Coca-Cola – its biggest one-day gain since October – after the company reported earnings that beat Wall Street expectations.
Citi analyst Heath Terry, hired by the bank last year to cover private tech companies, said he fielded questions from clients on Tuesday about the implications of OpenAI’s missed targets on the broader AI ecosystem.
“This is quite concerning, the $1.5 trillion number,” Terry said, referring to the figure some OpenAI executives use to describe the cost of their AI infrastructure needs. “When you put up numbers like that for a company at this stage of OpenAI, investors will focus on the risks and what can go wrong.” Recently, startups have cited a smaller figure of around $600 billion.
Alex Shahidi, co-chief investment officer at Evoke Advisors, said the circularity of OpenAI’s deals complicates the picture for markets. “But ultimately it’s revenue,” he said. “You have to make a profit at some point.”
Meanwhile, even strong results risk disappointing investors.
“The bar is very high,” Shahidi said. “At some point you’re not going to be able to exceed those high expectations. It seems like we’re starting to reach that point.”
Write to Jared Mitovich at Jared.mitovich@wsj.com and Bradley Olson at breadley.olson@wsj.com.