Shares of artificial intelligence-related firms dropped on Tuesday after the Wall Street Journal reported that OpenAI had missed its goals for new users and revenue in recent months, raising concerns over the ChatGPT creator’s growth prospects.
OpenAI CFO Sarah Friar expressed concerns to other leaders over the company’s ability to pay for future computing contracts if its revenue did not grow fast enough, the report said, citing people familiar with the matter.
Oracle’s (ORCL-N) shares dropped 3.4 per cent to USUS$167.3 in morning trading. The AI cloud firm is reported to have signed one of the biggest cloud deals with OpenAI, amounting to US$300-billion in computing power over a period of five years.
Oracle’s shares and bonds have dropped sharply from their recent highs as investors fretted over how the company would fund its data-center aspirations. Its five-year credit default swaps hit a two-week high on Tuesday, according to Markit data.
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Shares of cloud infrastructure company CoreWeave (RWV-Q), which signed a US$11.9-billion contract with OpenAI last month, lost 2.8 per cent.
Shares of chipmaker Arm Holdings (ARM-Q), which counts OpenAI as one of its customers, shed 6.3 per cent.
“We see this from time to time when you have any type of an AI heritage company, when they sell off, then it causes a ripple effect across the board, regardless of whether it’s warranted or not,” said Todd Schoenberger, chief investment officer at CrossCheck Management.
The scrutiny surrounding OpenAI comes as the AI startup lays the groundwork for an initial public offering that could value it up to US$1-trillion, amid other blockbuster IPOs expected this year such as Elon Musk’s SpaceX.
Japan’s SoftBank Group, a major investor in OpenAI, which has gone all in on the ChatGPT maker by offloading its stake in Nvidia and T-Mobile, closed down almost 10 per cent in Tokyo trading.
SoftBank had pledged a US$22.5-billion funding commitment to OpenAI by end of 2025 through cash-raising schemes, which included potentially tapping its undrawn margin loans borrowed against its ownership in Arm, sources told Reuters in December.
OpenAI’s reported growth concerns do not mean “that the industry is slowing down, it just means that perhaps there’s just more competition,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.
Microsoft and OpenAI on Monday renegotiated a pact that let Microsoft exclusively sell OpenAI’s AI models, clearing the way for the startup to forge new deals with Microsoft’s rivals.
The dour sentiment extended to other semiconductor names, with the Philadelphia SE Semiconductor Index down 3.2 per cent after hitting a record high last week.
Advanced Micro Devices (AMD-Q), Broadcom (AVGO-Q), Nvidia (NVDA-Q) were down between 2.1 per cent and 3.8 per cent. All three have partnered with OpenAI for deals that involved providing equipment or investment.
Megacap technology and growth names including Amazon.com (AMZN-Q), Alphabet (GOOGL-Q) and Microsoft (MSFT-Q) were also slightly lower, with a slate of earnings from the tech giants due throughout this week.
Optimism surrounding AI and expectations of robust earnings has helped Wall Street indexes touch all-time highs this month, despite some concerns over the U.S.-Iran war.