Tech Selloff Continues as AI Spending Concerns and OpenAI IPO Delay Rattle Markets
Technology stocks have suffered their worst week in months as investors question the return on massive AI spending, with the Nasdaq falling 4.5% and mega-cap stocks including Apple and Microsoft facing renewed selling pressure. Reports that OpenAI may delay its IPO until 2027 have intensified worries about AI economics.
Tech Rout Accelerates Amid AI Doubts
US stocks were down on Friday, with tech shares under renewed selling pressure, led by chipmakers. Reports that OpenAI could delay its IPO until 2027, alongside news that Apple and Microsoft are raising prices on some products, added to concerns over the AI sector. The Nasdaq index fell 4.5%, led by a large 5.5% decline in the so-called Magnificent 7 mega cap names. Meanwhile, the post IPO exuberance around SpaceX appears to be fading, with shares now down 25% from their peak.
Fundamental Questions on AI Investment
It was one of the worst weeks for tech stocks of the year, and Wall Street spent much of it confronting a question it had been too euphoric to ask: what exactly are we getting for all this AI spending? Weakness in tech dragged major indexes early, with concerns mounting about AI demand amid rising prices. The broader concern reflects investor anxiety about whether the trillions of dollars flowing into AI infrastructure will generate sufficient returns to justify the capital outlay.
Semiconductor Volatility and IPO Uncertainty
Other tech stocks including Oracle (ORCL) and CoreWeave (CRWV) fell ahead of the open after The New York Times reported that OpenAI might be poised to wait until next year to present its initial public offering, with executives at OpenAI potentially shifting from an earlier IPO due to choppy global markets and struggles for SpaceX (SPCX) shares after its IPO earlier this month. Semiconductor names like Micron initially surged on blockbuster earnings but faced profit-taking as the week progressed.
Signs of Market Rotation
Oil prices are tumbling and economic data remain upbeat. Against this backdrop the broader equity market delivered stronger performance, maintaining the rotation in leadership seen in recent weeks. 7 of 11 sectors are higher this week, with some of the moves showing hallmarks of a basic rotation into lagging areas like Healthcare. While mega-cap technology has stumbled, breadth indicators suggest underlying market resilience.
Forward-Looking Outlook
This continues the bumpy ride in AI stocks in recent weeks, but performance in other parts of the market was better, hinting at a potential rotation in market leadership. Investors are reassessing portfolio positioning as they await clarity on AI spending returns and navigate ongoing macroeconomic headwinds.