Advanced Micro Devices (AMD) saw its stock slide 4.2% to $320.66 in late-morning trading Tuesday, as a report from The Wall Street Journal indicated that OpenAI, a key customer, had fallen short of both user and revenue targets. The news fueled concerns about future data-center spending and prompted a broader selloff in AI chip stocks, including Nvidia (NVDA) and Arm Holdings (ARM).
The decline marks a significant shift in sentiment for AMD, whose recent stock rally has largely been driven by expectations that major AI firms will continue to invest heavily in advanced computing systems. Any indication that a key customer might scale back or delay spending threatens to undermine that thesis.
Adding to the pressure, Northland Capital Markets analyst Gus Richard downgraded AMD from Outperform to Market Perform, setting a price target of $260. In a note, Richard warned that consensus estimates for 2027 may be too optimistic. The downgrade came less than a week before AMD is scheduled to report its first-quarter results on May 5.
OpenAI and AMD have a multi-year GPU supply agreement that is set to begin later in 2026. Under the deal, OpenAI plans to deploy 6 gigawatts of AMD GPUs, including 1 gigawatt of Instinct MI450 chips in the second half of 2026. However, the report that OpenAI missed its user and revenue targets has raised questions about whether the company can sustain its massive data-center spending.
OpenAI CEO Sam Altman and CFO Sarah Friar dismissed the report, telling Reuters that the company remains committed to buying as much computing power as possible. “This is ridiculous. We are totally aligned on buying as much compute as we can,” they said.
The selloff spread across the AI chip sector. Nvidia, AMD, and Arm Holdings all traded lower, with Oracle also edging down due to its cloud ties with OpenAI. “That’s putting pressure on the Nasdaq and on the S&P because tech and communication services make up about 40% of the benchmark,” said Art Hogan, chief market strategist at B Riley Wealth.
Investors are now questioning whether the entire AI investment cycle is outpacing actual revenue generation. Dennis Follmer, chief investment officer at Montis Financial, noted that any stumble in AI demand or capital spending from major tech companies reporting this week could prompt the market to reconsider the rally’s sustainability.
Some analysts see the selloff as a reaction to increased competition rather than a fading appetite for AI. “It just means that perhaps there’s just more competition,” said Allan Small, senior investment advisor at Allan Small Financial Group. Todd Schoenberger at CrossCheck Management added that selloffs in AI-adjacent stocks can trigger a “ripple effect across the board, regardless of whether it’s warranted or not.”
AMD is trying to keep the focus on its AI roadmap. The company announced its “Advancing AI 2026” event for July 23 in San Francisco, where CEO Lisa Su is expected to outline AMD’s AI systems, from chips to software. But with first-quarter earnings due on May 5, the near-term outlook hinges on whether customers can turn their expensive compute bets into real revenue.
