For two years the AI capital-expenditure story rested on an assumption nobody had to defend: revenue at the model developers was compounding fast enough to justify the hardware orders. On Thursday that assumption got a number attached to it, and the number was smaller than the market believed.
The Nasdaq Composite fell 345.35 points to 27,193.34, a decline of 1.25%. The S&P 500 slipped 36.30 points, or 0.47%, to 7,765.47. The Dow Jones Industrial Average finished slightly higher, up 51.83 points to 51,231.70, a gain of 0.10% — a split that tells you the selling was concentrated rather than broad.
A $20 Billion Revision
The Financial Times reported that OpenAI told investors its annualized revenue is "approaching $50 billion," well below the roughly $70 billion figure that had circulated widely among market participants. The $20 billion gap is not a collapse in business — it is a correction of a comparison that was never apples-to-apples.
According to the FT, investors arrived at the higher number by benchmarking OpenAI against Anthropic's reported $65 billion run rate. But the two companies calculate annualized revenue differently: Anthropic includes sales through its cloud partners, while OpenAI does not. Restated on OpenAI's own basis, its revenue run rate now sits below Anthropic's.
The context matters for how the market read it. OpenAI raised $122 billion in March, and its planned IPO has been pushed to early 2027. A revenue base one-third smaller than assumed changes the arithmetic on how long that capital funds the compute commitments underpinning the chip sector's order book.
Semiconductors Take the Hit
The damage was sharpest in the names most levered to AI infrastructure spending. Intel fell 5.34%. Micron lost more than 5%, while Arm Holdings and Marvell Technology each dropped more than 6%. Broadcom declined 3.91% and AMD fell 3.89%. Nvidia, which closed in on a $6 trillion market capitalization earlier this week, gave back 2.94%. The Philadelphia Semiconductor Index fell as much as 4% intraday.
"We've got dueling headwinds with energy prices and Treasury yields and light on the economic data front, kind of a wait and see on earnings which really kick off in earnest next week," said Art Hogan, chief market strategist at B. Riley Wealth.
Yields and Oil Still in the Frame
Those headwinds did not go away. The 10-year Treasury yield stood at 5.29% and the 30-year at 5.67%, with the 10-year touching 5.32% intraday — near its highest level since 2002. Brent crude held above $103 a barrel and WTI above $91, after Brent spiked 4.9% to more than $105 on attacks against shipping in the Gulf and the Strait of Hormuz. Crude eased later in the session after President Trump said the US "will not be attacking Iran at any time prior to the Midterm Elections."
"Markets have turned more defensive this morning as renewed Middle East tensions, rising oil prices and persistently elevated bond yields put pressure on risk appetite," said Daniela Hathorn, senior market analyst at Capital.com.
Gold found some relief, with spot bullion up 0.5% at $4,132.66 an ounce as the dollar eased from an 18-month peak. That recovered part of Wednesday's slide to the metal's weakest level since August 5. Rate expectations stayed lopsided toward year-end: traders priced roughly an 18% chance of a hike at this month's meeting, but about an 80% probability of one in December.
Earnings season begins in earnest next week, which gives the AI trade a short window to answer the question Thursday raised — whether the spending is being validated by revenue, or merely by other spending.
Sources: Yahoo Finance, Financial Times (via TechCrunch and Yahoo Finance), TechCrunch, Bloomberg, CNBC, Reuters, CME FedWatch