U.S. markets experienced a downturn during Tuesday's late session, with technology stocks leading the decline. Following a weak performance report from OpenAI, investors began reassessing the sustainability of artificial intelligence-related expenditures. This week, market focus is centered on the earnings reports from several corporate giants.
The Dow Jones Industrial Average fell by 31.83 points, or 0.06%, to close at 49,135.96. The Nasdaq Composite dropped 223.36 points, or 0.90%, settling at 24,663.74. The S&P 500 index declined by 37.35 points, or 0.52%, finishing at 7,136.56.
Reports indicate that OpenAI recently failed to meet its internally set revenue and user growth targets. Specifically, ChatGPT did not achieve the milestone of one billion weekly active users by the end of 2025, and the company missed several monthly revenue goals this year.
OpenAI's Chief Financial Officer, Sarah Friar, has expressed concerns to management that if revenue growth does not accelerate, the company may struggle to afford its substantial computing power contracts.
This news has reignited market doubts about the returns on AI capital expenditures just before the peak of earnings season. A group of tech stocks closely linked to OpenAI faced collective pressure: CoreWeave and Oracle both fell over 7%, AMD dropped more than 5%, and Nvidia declined over 3%.
The growth challenges faced by OpenAI are closely tied to intensifying market competition. Google's Gemini experienced significant growth late last year and is now eroding OpenAI's market share, while Anthropic continues to expand its influence in the programming and enterprise sectors. Data shows that since the end of 2024, a basket of stocks associated with Google has surged over 300%, whereas a comparable basket of OpenAI-related stocks has gained only 75%.
These pressures also add uncertainty to OpenAI's plans for a public listing. Friar has informed the board and senior executives that the company is not yet prepared to meet the stringent disclosure standards required of publicly listed companies. With both OpenAI and Anthropic reportedly seeking listings as early as this year, the news of slowing growth poses a direct challenge to their high valuations.
In contrast to the tech sector, consumer goods giant Coca-Cola saw its shares rise over 5% during the session after reporting first-quarter revenue that exceeded expectations and raising its full-year profit guidance.
Market attention is fixed on a major week for corporate earnings. On Wednesday, Alphabet (Google's parent company), Microsoft, Amazon, and Meta are all scheduled to release their first-quarter results, with Apple reporting on Thursday. Combined capital expenditure for these four giants is projected to exceed $600 billion by 2026, and the market is highly focused on the returns from their AI investments and their future profit outlooks.
Analysts note that the market is navigating a "narrow path": any sign of slowing expenditure is viewed negatively, but if spending continues to increase significantly, it could raise further questions about returns and sustainability.
Tuesday's market movement occurred after the S&P 500 and Nasdaq closed at record highs in the previous session. The upward momentum was tempered by apparent stagnation in peace negotiations between the US and Iran.
Reports indicate that US President Trump was dissatisfied with a proposal from Iran regarding the opening of the Strait of Hormuz. Following this news, US crude oil prices increased by over 4% on Tuesday.
As of 8:35 AM Eastern Time, West Texas Intermediate crude futures were up more than 3%, to $100.11 per barrel. The international benchmark, Brent crude futures, rose 3.2% to $111.67 per barrel.
Multiple sources familiar with the matter stated that Trump has told his advisors he is unhappy with Iran's proposal to open the strait and end the conflict. It remains unclear why Trump disapproves of the Iranian offer.
Iran had previously proposed reopening the strait if the US lifted its naval blockade. However, Tehran wished to postpone negotiations concerning its nuclear program to a later date. Secretary of State Marco Rubio expressed skepticism about Iran's proposal in a news interview on Monday. Rubio stated that Tehran was willing to reopen the strait for navigation, but only if Iran maintained control over the waterway.
Rubio said, "This is not opening the strait. That is an international waterway. They cannot, and we cannot tolerate, their attempt to normalize a regime where Iran decides who can use the international waterway and how much they must pay."
The president of Lipow Oil Associates stated that energy transport through the Strait of Hormuz remains severely hampered, affecting approximately 20 million barrels of crude oil, fuel, and petrochemical products per day. Even if hostilities were to cease immediately, restoring normal market conditions would take months, as it would require clearing mines, alleviating tanker congestion, and gradually restoring production and refining.
He estimated that, considering transportation and distribution lags, the oil market would need at least four to six months to stabilize. During this period, with inventories near critical levels, prices are likely to remain elevated. "The longer the conflict lasts, the higher prices will go, especially as inventories are drawn down to critical operating levels. If the conflict ended tomorrow, the estimated drop in crude prices would be about $10 per barrel."
Lipow added that in the absence of any new negotiations, West Texas Intermediate prices would rebound to $100, and Brent crude would surpass $110. Investors are also monitoring OPEC developments after the United Arab Emirates announced it would exit the organization starting Friday.
On April 28, the UAE announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ mechanism, effective May 1. The UAE stated that the exit would help the country meet evolving demand and that it would gradually increase oil production.
Additionally, it was reported that a state-owned oil company in the UAE has notified some of its long-term customers that they can collect cargo via ship-to-ship transfer at the Port of Fujairah, outside the Persian Gulf, in May.
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