Semiconductor shares, which have surged over 40% so far this year, weighed particularly heavily on the Nasdaq. OpenAI missed internal targets for weekly users and revenue, raising concerns over the AI heavyweight’s ability to support its massive spending on data centers, according to a report from the Wall Street Journal.
Shares of Oracle fell; the company has come under scrutiny for its reliance on OpenAI.
Chip stocks also dropped, with Nvidia, AMD and Broadcom ending sharply lower. Nvidia-backed CoreWeave also slid.
“(OpenAI) is giving investors more food for thought, whether the growth is slowing and what that means for capex spending,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “You’ve got major hyperscalers coming out with results tomorrow, which probably gives investors even more reason to take a few chips off the table.”
First-quarter earnings season shifts into overdrive this week, with five of the companies in the Magnificent Seven group of AI-related megacap firms expected to post results. On Wednesday, Alphabet, Amazon, Meta Platforms and Microsoft are slated to report, with Apple on deck for Thursday. The companies on deck to report this week account for about 44% of the S&P 500’s total market capitalization, according to Raymond James. General Motors advanced after the automaker beat quarterly profit estimates and lifted its full-year earnings forecast, boosted by a resilient U.S. car market and an expected tariff refund.
United Parcel Service shares dropped after the package delivery company reiterated its full-year revenue target as spiking fuel costs offset underlying business improvement.
Coca-Cola rose following its better-than-expected quarterly report. The beverage giant played down the impact of high oil prices and raised its annual earnings target. Visa and Starbucks are due to report shortly.
According to preliminary data, the S&P 500 lost 34.81 points, or 0.49%, to end at 7,139.10 points, while the Nasdaq Composite lost 222.37 points, or 0.89%, to 24,664.73. The Dow Jones Industrial Average fell 20.44 points, or 0.06%, to 49,147.35.
THE WAR, SOARING CRUDE PRICES, AND THE FEDThe U.S. Federal Reserve has convened for what is likely to be Jerome Powell’s last monetary policy meeting as chair of the central bank. While the Fed is likely to leave its key interest rate unchanged on Wednesday, the accompanying statement and Powell’s subsequent press conference will be parsed for policymakers’ views on inflation risk related to the war-related energy price spike.
“We know that the Fed is effectively on hold,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “If oil prices remain elevated, does that create an environment where energy-related inflation is not being viewed as transitory any longer, but rather as something that has a very much longer-term impact and might therefore force the Fed to raise rates?” U.S. President Donald Trump is unhappy with Iran’s latest peace proposal because it would delay negotiations on the nuclear issue, dampening optimism that the conflict, which has rattled world markets and sent energy prices soaring, could be close to resolution. In another blow to oil-exporting countries, the United Arab Emirates announced on Tuesday it was withdrawing from OPEC.
Crude prices spiked, reviving inflation worries and contributing to risk-off sentiment.
