U.S. stocks were mixed during Tuesday's midday trading. Following a weak performance report from OpenAI, investors began reassessing the sustainability of AI-related expenditures. Market focus this week is on earnings reports from several corporate giants.
The Dow Jones Industrial Average rose by 80.53 points, or 0.16%, to 49,248.32. The Nasdaq Composite fell by 335.76 points, or 1.35%, to 24,551.34. The S&P 500 index declined by 51.20 points, or 0.71%, to 7,122.71. According to reports, OpenAI recently failed to meet its internally set revenue and user growth targets. ChatGPT did not achieve the milestone of one billion weekly active users by the end of 2025, and the company also missed several monthly revenue targets this year. OpenAI's Chief Financial Officer, Sarah Friar, has expressed concerns to management that if revenue growth is not fast enough, the company may struggle to afford its substantial computing power contract costs in the future. This news has reignited market doubts about the returns on AI capital expenditures just before the earnings season. A group of tech stocks closely linked to OpenAI faced collective pressure: CoreWeave and Oracle both fell more than 7%, AMD declined over 5%, and Nvidia dropped more than 3%. The growth challenges faced by OpenAI are closely related to increasingly fierce market competition. Google's Gemini experienced significant growth at the end of last year, eroding OpenAI's market share, while Anthropic continues to expand its influence in the programming and enterprise markets. Data shows that since the end of 2024, a basket of stocks related to Google has accumulated gains of over 300%, while a basket of stocks related to OpenAI has risen only 75% during the same period. These pressures also add uncertainty to OpenAI's plans for a public listing. Friar has informed the board and senior management that the company is not yet ready to meet the stringent information disclosure standards required for publicly listed companies. Against the backdrop of both OpenAI and Anthropic 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 more than 5% during the session. The company reported first-quarter revenue that exceeded expectations and raised its full-year profit guidance. Market attention is focused on a major week for earnings reports. This Wednesday, Alphabet (Google's parent company), Microsoft, Amazon, and Meta are scheduled to release their first-quarter results simultaneously, with Apple reporting on Thursday. The combined capital expenditure of these four giants is projected to exceed $600 billion by 2026, and the market is highly focused on their AI investment returns and future profit guidance. Analysts point out that the market is navigating a "narrow path": any signs of slowing expenditure are viewed negatively, but if spending continues to increase significantly, it could raise further questions about returns and sustainability. Tuesday's market movements occurred after the S&P 500 and Nasdaq closed at record highs in the previous trading session. The market's upward momentum was tempered as peace talks between the U.S. and Iran appeared to stall. Reports indicate that the U.S. President expressed dissatisfaction with Iran's proposal to open the Strait of Hormuz. Influenced by this news, U.S. crude oil prices rose more than 4% on Tuesday. As of 8:35 AM Eastern Time, West Texas Intermediate crude futures were up over 3%, to $100.11 per barrel. The international benchmark Brent crude futures rose 3.2%, to $111.67 per barrel. Several informed sources stated that the President has told his advisors he is dissatisfied with Iran's proposal to open the strait and end the war. It remains unclear why the President dislikes Iran's proposal. Iran had previously proposed reopening the strait if the U.S. lifts its maritime blockade. However, Tehran wishes to postpone negotiations concerning its nuclear program to a later date. The Secretary of State expressed skepticism about Iran's proposal in a news interview on Monday. The Secretary stated that Tehran is willing to reopen the strait to navigation, but only if Iran retains control over the waterway. The Secretary said, "This is not opening the strait. That is an international waterway. They cannot, and we cannot tolerate, their attempt to normalize a system where Iran decides who can use the international waterway and what price 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 requires 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 the prices, especially as inventories are drawn down to critical operating levels. If the conflict ended tomorrow, crude oil prices are estimated to fall by $10 per barrel." Lipow indicated that in the absence of any new negotiations, West Texas Intermediate crude prices would rebound to $100, and Brent crude would surpass $110. Investors are also monitoring OPEC developments, following the announcement by the United Arab Emirates that it will withdraw from the organization starting Friday. On April 28, the United Arab Emirates announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ mechanism, effective May 1. The UAE stated that the withdrawal will help the country meet evolving demand and that it will gradually increase oil production. Additionally, reports indicate that a state-owned petroleum enterprise 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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