Nvidia stock slides as OpenAI fears spark selloff in chip stocks

Semiconductor stocks declined sharply on Tuesday, with Nvidia and its peers coming under pressure after fresh concerns emerged about the financial trajectory of OpenAI.

Nvidia shares fell about 1.5% in trading, reversing some of the previous session’s gains when the stock closed at a record high after rising 4%.

The chipmaker had recently broken out of a prolonged trading range between $165 and $195, underscoring the strength of its recent rally.

The selloff extended across the semiconductor sector.

Advanced Micro Devices dropped 3.1%, while Broadcom declined 3.29%. Arm Holdings slid about 6.7%, and Intel, Micron Technology, and Applied Materials also posted notable losses.

The downturn comes after a strong run for chip stocks, with the Philadelphia Semiconductor Index climbing nearly 50% from its late-March low.

The rally has been fueled by optimism surrounding artificial intelligence infrastructure spending.

OpenAI growth worries shake AI investment narrative

Investor sentiment shifted after a report by The Wall Street Journal revealed that OpenAI had missed internal targets for new users and revenue.

The report also highlighted concerns among company executives about whether the firm can sustain its heavy spending commitments on data center infrastructure.

Chief Financial Officer Sarah Friar reportedly told leadership she was worried the company might not be able to meet future computing contract obligations if revenue growth does not accelerate.

Board members have also increased scrutiny of data-center deals and questioned CEO Sam Altman’s strategy to secure additional computing capacity.

OpenAI acknowledged its aggressive investment stance, stating it was “buying as much compute as we can.”

Nvidia, AMD, and Broadcom all have supply agreements with OpenAI, making them particularly sensitive to shifts in the company’s outlook.

Nvidia has also made significant financial commitments, investing $30 billion in OpenAI’s latest funding round, although it scaled back an earlier plan to invest as much as $100 billion.

The report also noted that OpenAI has faced increasing competition, with rivals such as Anthropic gaining traction in coding and enterprise markets.

Meanwhile, AI models from Alphabet have also received strong reception, contributing to evolving perceptions around OpenAI’s leadership in the space.

Altman and Friar said in a joint statement that any suggestion they are divided or pulling back on securing new computing resources is "ridiculous."

Profit-taking adds to pressure ahead of Big Tech earnings

Market participants also pointed to profit-taking as a factor behind the decline, given the sector’s strong performance in recent weeks.

“This morning’s moves in individual stocks indicated some profit-taking across semiconductors, which seems reasonable given their incredible run since the end of March,” wrote David Morrison, senior market analyst at Trade Nation, in a research note.

The pullback comes ahead of a crucial earnings period for major technology companies, which is expected to provide further clarity on artificial intelligence spending trends.

Companies including Alphabet, Microsoft, Amazon, and Meta Platforms are set to report results, with investors closely watching for updates on capital expenditure.

Collectively, large US technology firms are expected to commit more than $700 billion toward infrastructure investments this year, a figure that underpins the bullish case for semiconductor demand.

Chip-stock investors will be looking to these earnings reports for reassurance that spending plans remain intact, even as concerns about OpenAI introduce fresh uncertainty into the sector’s near-term outlook.