A report saying that OpenAI’s revenue is $20 billion less than previously signalled is upending the market, calling into question the insane AI (or SI if I don’t want to be an enemy of the state) spending.
That’s a big miss on revenues and if OpenAI isn’t hitting targets, then it’s not likely that anyone is. The high competition in the space and easy ability to switch models makes the economics tough and that’s always been the bear case. Now that some of the numbers are hitting, the selling is intensifying in the Nasdaq.
CNBC is also out with a report on the original report that says there are ‘nuances’ involved in the $20 billion number but that it’s accurate. With all the lending and vendor financing ongoing between the model-makers and chip-makers and others, this isn’t just a risk to OpenAI but the whole ecosystem. As soon as someone questions the infinite AI machine, the whole thing has the potential to re-rate at much lower levels. Moreover, the rest of the market is already struggling and has been held together by AI and tech names.
Nasdaq Comp:
You never really know what will be the report that causes the big correction in the AI theme but — at the very least — this is a small preview of what could be to come.
Among the biggest losers:
- Vistra
- Intel
- Constellation
- Corning
- Enphase
- Micron
- AMD
- Oracle
- Broadcom
It’s interesting that the energy names are getting hit just as hard as the chip names.
Here are the details:
OpenAI told investors its annualized revenue was nearing $50 billion at the end of September, about $20 billion short of the $70 billion figure that made the rounds last month.The gap comes down to accounting. Anthropic books sales made through cloud partners like AWS and Google Cloud as revenue, and OpenAI doesn’t. Investors had been grossing up OpenAI’s numbers to put them on an apples-to-apples footing with Anthropic, and that adjustment is where the Street’s $70 billion estimate came from.
What’s also notable about this dip following the report is that the US dollar fell with the Nasdaq. That underscores the argument that it’s been equity and private debt capital flows propping up the dollar.
This article was written by Adam Button at investinglive.com.