Tech Stocks Plummet on Reduced OpenAI Revenue

The S&P 500 fell by 0.47% and the Nasdaq by 1.2%, failing to rebound led by tech stocks.

The Dow Jones Industrial Average and Russell Index remained flat, showing relative strength.

Reports that OpenAI's annual revenue would be around $50 billion, falling short of the previously expected $70 billion, shocked the market.

As a result, major semiconductor infrastructure-related stocks, including Nvidia, Broadcom, AMD, and Intel, all declined.

Oracle, semiconductor equipment stocks, and Cisco also experienced significant declines, indicating a general weakening trend across tech stocks.

Brent crude rose by 2.34% to $103.61, and WTI surpassed the $90 mark, attributed to Trump's remarks, a hurricane in the Southeast, and instability in the Strait of Hormuz.

As the investment appeal of long-term bonds increased, the 10-year yield dropped to around 5.27%.

According to financial documents reviewed by the Financial Times, OpenAI's annual revenue as of September was around $50 billion, which is $20 billion lower than previously expected by investors.

This difference is attributed to a discrepancy in calculation methods: Anthropic includes revenue through cloud partners, while OpenAI excludes it.

Consequently, investors attempting a simple comparison appear to have caused market misunderstanding and volatility.

OpenAI's revenue forecast was reportedly revised downwards from $70 billion to $50 billion, raising concerns about decelerated growth.

Amid growing concerns over significant operating losses and cash burn, major tech stocks associated with OpenAI, such as Microsoft, Oracle, and AMD, all declined.

Notably, the Nasdaq 100 index plummeted by over 300 points, and reports also emerged about potential delays in AI companies' IPO schedules.

The growth rate of data centers and AI infrastructure investments by hyperscalers like Microsoft, Amazon, and Google are considered key indicators for assessing ecosystem profitability, rather than OpenAI's single revenue.

It is deemed more important that these companies secure their share in the AI infrastructure building process, and that AI infrastructure investment is likely to be distributed rather than confined to a specific lab.

Therefore, focusing on the overall growth rate of data centers and the revenue streams of the entire AI ecosystem is more crucial than individual company revenue figures.

Some argue that it is difficult to consider OpenAI's annual revenue a failure, given it grew 2.5 times in nine months, from $20 billion at the end of last year to $50 billion.

Other AI companies like Anthropic are also growing rapidly, and major tech firms such as Google and Meta still show strong willingness to invest heavily in AI.

Analysis suggests that fundamental demand for AI infrastructure expansion remains unchanged, as data center demand continues to exceed supply.

Data center leasing volumes are rapidly increasing, exceeding $850 billion, clearly demonstrating strong AI infrastructure demand.

Meanwhile, the 30-year Treasury bond auction recorded a bid-to-cover ratio of 2.54, confirming unprecedented demand, with overseas central banks and global asset managers purchasing 72.3% of the volume.

It is analyzed that the current high interest rate levels acted as an attractive entry point for long-term investors, contributing to the success of the Treasury auction.

Pension funds and insurance companies purchased $4.58 billion, supporting the strong 30-year Treasury bond auction.

This auction recorded a bid-to-cover ratio of 2.54 and a mandatory bid ratio of 72%, reaffirming that the strong 10-year auction was not a coincidence.

Global institutions are analyzed to have shown strong buying interest, aiming to lock in a 5.6% yield for 30 years.

The federal budget deficit, according to CBO standards, is expected to approach $2 trillion, a 12% increase from the previous year and the highest since 2021.

With government spending at $7.4 trillion and revenue at only $5.4 trillion, the fiscal deficit is projected to exceed 6% of GDP, and public debt will surpass 100% of GDP.

Such massive fiscal deficits and rising borrowing costs are likely to create a structure where interest rates find it difficult to fall significantly below 5%.

News of Iran strengthening its oil facilities and former President Trump considering military action heightened geopolitical risks in the Middle East.

Hurricane Isaias led to a 25% reduction (500,000 barrels) in Gulf of Mexico crude oil production, increasing concerns about supply disruptions.

These factors caused oil prices to surge by 4%, halting the decline in market interest rates and exerting upward pressure again.

A bull market is particularly anticipated to expand in rapidly growing sectors such as energy.

The 10-year Treasury yield reached its highest level since 2002, increasing interest in the bond market.

Many investors interpret the current high-interest rate phenomenon as a consequence of rapid growth in AI development rather than rising inflation.

Analysis also suggests caution is needed if yields reach the 5.5% to 6% range.

The Russell 2000 has fallen 5% in the last month, showing a 16% gap compared to the Nasdaq 100, indicating extreme undervaluation.

The Relative Strength Index (RSI) is at 12.77, a historical low, which could stimulate contrarian investment sentiment.

However, as seen in 2007 and 2011, analysis suggests the possibility of further declines even after an oversold period cannot be ruled out.

This is due to expectations that the market size will change through the transition to AI-based customized applications.

The implementation of automated feedback loops between field and product via AI engineers is expected to act as a powerful growth driver in the early stages of corporate AI integration.

Consequently, the investment rating was upgraded from 'Hold' to 'Buy,' and the 12-month price target was adjusted from $305 to $330.

With geopolitical concerns such as war easing and an attractive investment environment forming, the net profit margin forecast for fiscal year 2017 was revised upwards from 2.9% to 3.3%, and the company is undervalued with an EV/EBITDA ratio below 13 times enterprise value.

Regarding Nurogene, whose stock price has fallen 32% over the past three months due to poor performance, JPMorgan forecasts a 132% upside from the current price, setting a target price of $60 and an 'Overweight' rating.

It is assessed to have a 132% upside from the current stock price, and clinical development of NGN-401, a treatment for Rett syndrome, is underway.

Although the stock price has fallen 32% over the past three months due to a general decline in the biotech sector and weak Q2 earnings, given the nature of drug development companies, a long-term perspective until FDA approval is necessary.