Shares of major chipmakers declined Tuesday following a Wall Street Journal report that OpenAI failed to meet its internal user growth and revenue targets, sparking fresh concerns about the sustainability of artificial intelligence spending. The selloff hit Nvidia Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Broadcom Inc. (AVGO) ahead of a crucial earnings week for Big Tech companies.
By mid-afternoon, Nvidia shares fell approximately 0.9%, AMD lost 2.5%, and Broadcom slid 4.1%. The VanEck Semiconductor ETF (SMH) dropped 2.4% as the broader chip sector came under pressure. The Philadelphia SE Semiconductor Index, which had risen over 40% year-to-date through Monday, retreated as investors reassessed the near-term outlook for AI-driven demand.
The Wall Street Journal reported that OpenAI, the creator of ChatGPT, missed its latest targets for both user growth and revenue. According to the report, OpenAI CFO Sarah Friar warned executives that the company could face challenges funding upcoming computing deals if revenue does not accelerate. OpenAI disputed claims of internal disagreements over spending, with CEO Sam Altman and Friar stating in an email to Reuters that they are “totally aligned on buying as much compute as we can.”
The report weighed on other AI-linked names as well. Oracle Corporation (ORCL) declined on concerns about cloud demand from OpenAI, while CoreWeave and Arm Holdings plc (ARM) also lost ground. Todd Schoenberger, chief investment officer at CrossCheck Management, told Reuters that “weakness in an AI-linked company can create a ripple effect across the board.”
The selloff comes as investors await earnings reports from Alphabet Inc. (GOOGL), Microsoft Corporation (MSFT), Meta Platforms, Inc. (META), and Amazon.com, Inc. (AMZN), all scheduled for Wednesday. Together, these tech giants are expected to invest roughly $600 billion in AI initiatives this year, including capital expenditures on data centers, chips, and related hardware. The key question, according to Joe Maginot, large-cap portfolio manager at Madison Investments, is “what’s the return on all the capital expenditure?”
While some analysts cautioned against overreacting to a single report, others noted that increased competition in the AI space could pressure OpenAI specifically without undermining the broader sector. Oliver Pursche, senior vice president at Wealthspire Advisors, told Reuters that OpenAI fell short of targets, but “there’s lots of other players in the field.” Allan Small, senior investment adviser at Allan Small Financial Group with iA Private Wealth, added that he does not see OpenAI’s growth worries as a sign the broader AI sector is losing steam, saying “there’s just more competition.”
If Big Tech companies reaffirm their aggressive AI spending plans, Tuesday’s dip may prove to be a temporary blip that clears out some of the excess. However, if Microsoft, Alphabet, Meta, or Amazon signal a pullback in spending, the fallout could extend beyond OpenAI-related names and weigh on semiconductor suppliers more broadly. For now, the market is focused not just on demand for AI chips, but on whether the buyers of those chips can monetize their investments and how quickly that revenue materializes.
