Nasdaq falls 1% as AI trade stumbles following OpenAI revenue setback

The Nasdaq Composite slid on Thursday as new details about OpenAI spooked investors, putting the artificial intelligence trade under pressure.

The tech-heavy Nasdaq was down 1.25% to close at 27,193.34, while the S&P 500 declined 0.47% to 7,765.36. The Dow Jones Industrial Average added 51.77 points, or 0.1%, to end at 51,231.64.

Shares of key tech names came under pressure after OpenAI’s annualized revenue was revealed to be short of the amount previously signaled. Shares of Oracle were down more than 5%, while chipmakers such as Nvidia and Advanced Micro Devices lost nearly 3% and almost 4%, respectively.

Adding to the downbeat sentiment, oil prices spiked also after President Donald Trump said he doesn’t want to make a deal with Iran to end the war, while the U.S. is reportedly preparing for “massive bombing” in the Middle East. However, he later said that the U.S. won’t attack Iran before the midterm elections early next month, moving oil off its highs. Brent crude was up 4.07% to $104.28 per barrel. West Texas Intermediate futures, meanwhile, advanced 3.64% to settle at $91.49.

Traders also watched the moves in rates after the 10-year Treasury yield and 30-year yield scaled to fresh 24-year highs this week. The benchmark 10-year yield was last down 5 basis points at 5.227%, while the 30-year yield was down 6 basis points at 5.601%. Those moves came after a solid 30-year auction by the Treasury.

“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. “If we announced a deal with Iran tomorrow that was structurally sound and removed a lot of the tensions from the area, and oil dropped from $90 a barrel to $70 a barrel, yields would come down meaningfully.”

Yields and oil have stoked volatility in equities of late, as concern grows that higher energy prices will keep inflation elevated and force the Federal Reserve to further raise rates.

While Mayfield said equities have been “pretty resilient” overall in the face of these pressures, with the S&P 500 and Nasdaq notching fresh all-time highs this week, he still doesn’t think it would “take much of a move higher” on the long end of the yield curve to spell “more significant headwinds” for stocks. He believes yields could stabilize in the 5% to 6% range.

“We are in the process of the market adjusting to these new yields,” he added. “In a lot of ways, higher yields are reflective of stronger nominal growth and slightly higher inflation, and if that’s the case going forward, then again, it makes the argument that this kind of higher-for-longer or normal-for-longer rate environment is probably here to stay, barring a big recession where the Fed cuts rates to zero.”

Palantir Technologies was one of the few stocks that closed higher on Thursday, with shares gaining 2% after the name received an upgrade at Goldman Sachs. The firm called for more upside ahead as the total addressable market could be “setting up for another step function change” as a result of the shift to sovereign AI and bespoke applications.