Wall Street Highlights: S&P 500, Nasdaq Falls As Reports On OpenAI Sink Chipmakers

A selloff in chipmakers weighed on stocks as speculation around OpenAI's revenue revived worries that the artificial-intelligence spending spree is becoming harder to justify.

Tech shares led losses in the S&P 500 on reports that annualized revenue at the ChatGPT maker will be lower than some estimates for the firm. The Nasdaq 100 fell 1.4%. A gauge of chip giants sank 3.4%. Oil jumped, but settled below session highs as President Donald Trump said the US won't attack Iran before the midterm elections. Treasuries rose on a solid sale of 30-year bonds.

OpenAI is on track to generate annualized revenue of roughly $50 billion based on its current performance, according to people familiar with the matter. Some outlets reported last month it was already on track to generate nearly $70 billion. The Financial Times earlier reported the new financial estimate.

Insatiable demand for all things related to AI had powered a surge in chipmakers from this year's market lows. But volatility has resurfaced amid worries about the staying power of an investment boom propped up by rising debt levels.

ALSO READ | Math Association Accuses Open AI Of Plagiarism, Copyright Violation, Urges Mathematicians Not To Work With Firm

"Investors are becoming a bit skeptical about how long this huge AI spending can last with borrowing costs rising in a significant way," said Matt Maley at Miller Tabak.

"We retain strong conviction in the AI growth story, and believe AI-related investment remains a powerful tailwind for the broader equity market," Ulrike Hoffmann-Burchardi at UBS Chief Investment Office said in a recent note. "But the increasing concentration of market gains reinforces the importance of managing risk through a broadly diversified equity portfolio."

This is particularly relevant to AI, where it is not yet clear how value creation will ultimately be distributed among chip designers, cloud providers, model developers, and application companies, she added.

"Ongoing questions over returns on investment, AI safety, financing, and execution could also contribute to periods of volatility, especially while elevated yields increase the cost of capital," Hoffmann-Burchardi noted. "Diversification can help investors retain exposure to the structural opportunity without relying excessively on a narrow group of market leaders."

Traders also kept an eye on the latest remarks from central bank officials.

ALSO READ | Brent Crude Oil Near $104: Iran Attacks Tankers, Hurricane Threatens US Supply

Federal Reserve Governor Christopher Waller said further rate hikes will likely be needed, though officials have some flexibility on timing and don't need to tighten at consecutive meetings. Fed Bank of St. Louis President Alberto Musalem signaled rates should increase over the next six-to-nine months, but stopped short of endorsing a move at this month's gathering.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.