The Nasdaq Composite fell 1.25% on Thursday, dragged down by a sell-off in AI-related stocks following news that OpenAI’s revenue fell short of expectations. Major tech companies like Oracle, Nvidia, and AMD experienced significant losses.
Meanwhile, oil prices spiked due to geopolitical tensions in the Middle East but later eased after President Trump stated the U.S. would not attack Iran before the midterm elections. Rising Treasury yields, influenced by energy prices and inflation concerns, continue to pressure the market, although some analysts remain optimistic about the long-term AI outlook.
Nasdaq Drops 1% as AI Stocks Stumble on OpenAI Revenue Setback
Live Updates
The Nasdaq Composite slid on Thursday, shedding 1.25% to close at 27,193.34, as new details about OpenAI's revenue performance spooked investors and put the artificial intelligence trade under pressure. The broader S&P 500 declined 0.47% to 7,765.36, while the Dow Jones Industrial Average managed a slight gain, adding 51.77 points, or 0.1%, to end at 51,231.64.
Tech stocks bore the brunt of the sell-off. Shares of key players like Oracle tumbled over 5%, while semiconductor giants Nvidia and Advanced Micro Devices (AMD) lost nearly 3% and almost 4%, respectively. This downturn followed reports that OpenAI's annualized revenue fell short of previous projections, casting a shadow over the highly anticipated AI sector.
Adding to the market's volatility, oil prices initially spiked following President Donald Trump's remarks regarding Iran and potential military actions in the Middle East. However, oil pared some of its gains later in the day after Trump clarified that the U.S. would not attack Iran before the upcoming midterm elections. Brent crude finished up 4.07% at $104.28 per barrel, and West Texas Intermediate (WTI) futures advanced 3.64% to settle at $91.49.
Meanwhile, Treasury yields continued to move higher, with the 10-year Treasury yield and 30-year Treasury yield scaling fresh 24-year highs earlier in the week, although they saw slight pullbacks following a solid 30-year auction. Analysts attributed the rising yields to inflation pressures, primarily driven by energy costs, which are shifting the Federal Reserve's stance and impacting the long end of the yield curve.
"At the end of the day, I think it's inflation pressures, primarily driven by energy, that have shifted the Fed's disposition and have in a lot of ways shifted the long end of the curve as well," said Ross Mayfield, Baird investment strategist. He noted that if geopolitical tensions eased and oil prices dropped significantly, yields would likely decrease.
Despite the broader market pressures, Palantir Technologies stood out as one of the few stocks closing higher, gaining 2% after receiving an upgrade from Goldman Sachs. The firm cited the company's potential to capitalize further on the AI boom, particularly with the shift towards sovereign AI and bespoke applications.
Other notable market movements included a notable dip in Bitcoin mining stocks amid a pullback in cryptocurrency prices and concerns about an AI pivot. Companies like Cipher Mining, Hut 8, and Terawulf saw significant drops.
On the earnings front, PepsiCo shares rose after reporting better-than-expected third-quarter results. However, Levi Strauss shares dipped in extended trading despite an improved profit outlook, as the company lowered its full-year net revenue growth guidance.
Market Snapshots:
- Nasdaq Composite: Down 1.25% at 27,193.34
- S&P 500: Down 0.47% at 7,765.36
- Dow Jones Industrial Average: Up 0.1% at 51,231.64
- Brent Crude: Up 4.07% at $104.28 per barrel
- WTI Crude: Up 3.64% at $91.49 per barrel
- 10-year Treasury Yield: Down 5 basis points at 5.227%
- 30-year Treasury Yield: Down 6 basis points at 5.601%
Key Market Movers:
- OpenAI: News of revenue falling short of projections impacted AI-related stocks.
- Oracle: Shares down over 5%.
- Nvidia: Shares down nearly 3%.
- AMD: Shares down almost 4%.
- Palantir Technologies: Shares up 2% after Goldman Sachs upgrade.
- Bitcoin Miners (Cipher, Hut 8, Terawulf): Stocks tumbled amid crypto weakness and AI pivot concerns.
- PepsiCo: Shares rose on strong earnings.
- Levi Strauss: Shares dipped after lowering revenue guidance.
Analyst Insights:
Ross Mayfield of Baird highlighted the impact of energy-driven inflation on yields and the Fed's stance, suggesting that a resolution to geopolitical tensions could lead to lower yields.
Gil Luria from D.A. Davidson expressed optimism about the AI trade despite OpenAI's revenue report, emphasizing the strong consumer and enterprise spending on AI technologies.
Wells Fargo noted that the 30-year Treasury auction signaled a curve-steepening trend, with investors demanding more compensation for holding long-duration assets.
St. Louis Fed President Alberto Musalem indicated the need for further "policy firming" to combat inflation, while Fed Governor Christopher Waller also signaled potential additional rate hikes.
