Nasdaq Falls As OpenAI Miss Report Sparks Fresh AI Bubble Fears

The Nasdaq Composite fell sharply on Tuesday, lagging the S&P 500 and Dow Jones Industrial Average, after a report that OpenAI missed its internal revenue and user targets triggered fresh concerns over the sustainability of the artificial intelligence spending boom.

Investor sentiment in technology stocks weakened as markets reassessed the pace of AI demand ahead of a crucial earnings week for major US tech firms.

OpenAI Report Raises Questions Over AI Demand

According to a Wall Street Journal report, OpenAI failed to meet internal targets for weekly users and revenue, with executives reportedly raising concerns over the company’s ability to sustain its heavy spending on data centres.

Though OpenAI is privately held, its performance is closely watched by investors as a barometer for broader AI demand, given its ties to several major listed technology companies.

AI-Linked Stocks, Chipmakers Under Pressure

Shares of Oracle fell 4.1% amid scrutiny over its reliance on OpenAI to support its cloud computing ambitions.

Semiconductor stocks also came under pressure, with Nvidia down 3.5%, AMD falling 5%, and Arm Holdings dropping 8.8%.

Nvidia-Backed CoreWeave Slid 6.2%

“Any misstep involving AI-related demand or capital budget expenditures from one of the four Magnificent 7 companies reporting Wednesday could easily give this market second thoughts about how far it has run in the past month,” wrote Dennis Follmer, chief investment officer at Montis Financial.

Amazon, Meta, Microsoft and Alphabet are among the major companies scheduled to report earnings on Wednesday.

Nasdaq Underperforms Broader Market

At 11:49 AM ET, the Nasdaq Composite had fallen 357.34 points, or 1.44%, to 24,529.76.

The S&P 500 slipped 55.80 points, or 0.78%, to 7,118.11, while the Dow Jones Industrial Average rose 60.16 points, or 0.12%, to 49,227.01.

The S&P 500 information technology sector dropped 2.2%, making it the benchmark’s worst-performing sector. Six of the 11 major S&P sectors traded in negative territory.

The Philadelphia Semiconductor Index declined 4.7%, heading for a second straight day of losses after an 18-session winning streak in which it had surged 47.2%.

US-Iran War, Oil Spike Add To Market Jitters

Geopolitical tensions also continued to weigh on investor sentiment, with the US-Iran war remaining a key overhang on equities.

A US official said President Donald Trump was dissatisfied with Iran’s latest proposal to resolve the Middle East conflict, dampening hopes for a diplomatic breakthrough.

“If the diplomatic and military stalemate between the U.S. and Iran continues, and the Strait of Hormuz remains largely closed, policymakers and market participants will find it increasingly difficult to keep ‘looking through’ the crisis,” said Jonas Goltermann, chief markets economist at Capital Economics.

Oil prices have climbed 53% above pre-war levels as disruption persists in the Strait of Hormuz. Brent crude topped $110 a barrel for the first time in three weeks.

In a fresh setback for oil-exporting nations, the United Arab Emirates announced on Tuesday that it would leave OPEC.

Earnings Move Individual Stocks

United Parcel Service dropped 4.4% after reporting a steep decline in quarterly adjusted profit.

General Motors, despite raising its full-year earnings forecast on the back of a resilient US auto market and expected tariff refunds, fell 2.6%, narrowing earlier losses of 4.1%.

Coca-Cola climbed 6.1% after lifting its annual adjusted profit forecast.

Market Breadth Weakens

Decliners outpaced advancers by 1.61-to-1 on the NYSE and 1.77-to-1 on the Nasdaq.

The S&P 500 posted three new 52-week highs and 13 new lows, while the Nasdaq recorded 80 new highs and 77 new lows.