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Briefing.com Summary:
*Many AI infrastructure plays are down on a Wall Street Journal report raising concerns about OpenAI's revenue growth and ability to pay for future computing needs.
*Oil prices have climbed back above $100/bbl.
*Treasury yields are rising along with inflation concerns.
OpenAI isn't closed for business (far from it), but a Wall Street Journal report has raised concerns about just how much business OpenAI is doing these days. According to "people familiar with the matter," the company's CFO is concerned that OpenAI won't be able to pay for future computing needs if its revenue doesn't grow fast enough.
That is an understandable concern for a CFO to have, but when you are OpenAI—among the hottest AI companies out there—it is a concern that sends shockwaves through a host of related infrastructure plays, like Oracle (ORCL), NVIDIA (NVDA), and Corning (GLW).
This report is the basis for the underperformance of the S&P 500 and Nasdaq 100 futures. If the WSJ report is a fallacious report, we would think that OpenAI, reportedly looking to IPO this year, would take aim to debunk it. Perhaps it will, but for now, there is a sell-first-ask-questions-later approach that is cooling off a lot of red-hot stocks feeding on the massive AI capex spending plans.
The semiconductor space seems to be the main target in that regard.
That is weighing on the stock market this morning, along with oil prices rising back above $100/bbl (+4.2% to $100.41) as the standoff between the U.S. and Iran over the Strait of Hormuz blockade persists. On a related note, it was reported a short time ago that the UAE will be leaving OPEC, effective May 1.
This restless rise in oil prices is helping to push up Treasury yields. The 2-yr note yield is up four basis points to 3.84%, and the 10-yr note yield is up three basis points to 4.37%.
The pre-open tone, therefore, is a defensive-minded tone despite some impressive earnings results from General Motors (GM), Sherwin-Williams (SHW), and Coca-Cola (KO).
Currently, the S&P 500 futures are down 40 points and are trading 0.6% below fair value, the Nasdaq 100 futures are down 305 points and are trading 1.1% below fair value, and the Dow Jones Industrial Average futures are up 113 points and are trading 0.3% above fair value.
The broader market is poised, then, to take a dip when the opening bell rings. Most days, that has been Pavlov's opening bell for buyers, so the buy-the-dip conditioning will be put to the test today with oil prices up, Treasury yields up, geopolitical uncertainty up, and many leadership stocks down.
