Wall Street\u2019s yearslong bet on AI is facing a severe test on Thursday, as investors might begin to view OpenAI\u2014and generative AI in general\u2014not as a catalyst for continuous growth, but as a source of systemic risk for Big Tech.<\/p>\n
A sharp selloff in tech stocks on Thursday underscored investors\u2019 exhaustion with the \u201cspend now, profit later\u201d model that has propelled the AI bull market for three years. Microsoft<\/a> led the retreat, with its shares plummeting 12% by noon, erasing more than $440 billion in market value, a collapse it hasn\u2019t seen since the pandemic. The Nasdaq<\/a> was down almost 2% at time of writing.\u00a0<\/p>\n The immediate catalyst, it seems, is an intensifying focus on capex, or capital expenditures. Microsoft revealed <\/a>that its spending surged 66% to $37.5 billion in the latest quarter, even as growth in its Azure cloud business cooled slightly. Even more concerning to analysts, however, was a new disclosure that approximately 45% of the company\u2019s $625 billion in remaining performance obligations (RPO)\u2014a key measure of future cloud contracts\u2014is tied directly to OpenAI, the company revealed after reporting earnings<\/a> Wednesday afternoon. (Microsoft is both a major investor in and a provider of cloud-computing services to OpenAI.)<\/p>\n \u201cIt\u2019s the collapse of software and the ascent of hardware, and it is staggering,\u201d CNBC\u2019s Jim Cramer noted<\/a> on X on Thursday, as the market punished companies that are spending billions on software infrastructure while failing to show immediate returns.<\/p>\n It\u2019s an \u201cominous\u201d statistic, Morning Brew cofounder Austin Rief wrote<\/a> on X, especially combined with the fact that Meta<\/a> is planning to devote most of their free cash flow to capex. Meta has evaded the selloff<\/a> on a stronger-than-expected revenue forecast, showing a healthy 24% year-over-year revenue increase, driven by online ads. The fact that Wall Street is letting Meta get away with their also massive capex indicates the reason why investors are selling off: They don\u2019t trust OpenAI to bring that revenue on their own without massive infusions of outside cash.<\/p>\n The sentiment shift is not limited to Redmond. Oracle<\/a> has seen its shares halved from their September highs, erasing nearly $463 billion in value. Once a darling of the AI trade, Oracle has also struggled with investor confidence that the massive data centers it is building for OpenAI will get funded eventually. Additionally, the timeline for several projects has reportedly slipped to 2028, creating a gap between the company\u2019s heavy debt-funded spending and the arrival of actual revenue.<\/p>\n OpenAI has made about $1.4 trillion in commitments<\/a> to procure both the energy and compute it needs to fuel its operations. But its revenue barely crossed $20 billion in 2025.<\/p>\n Investors are increasingly critical of what they describe as \u201ccircular\u201d deals involving the industry\u2019s biggest players. On Wednesday evening, The Information reported<\/a> that OpenAI is seeking a fresh $60 billion in funding from heavyweights like Nvidia<\/a> and Amazon<\/a>. However, market reaction suggests that more capital isn\u2019t going to be a viable substitute for a business model anymore. \u201cMaybe Oracle stock got way ahead of fundamentals, and now the market\u2019s saying, \u2018All right, show me, I want to see it,\u2019\u201d Eric Diton, president of the Wealth Alliance, told<\/a> Yahoo<\/a> Finance.<\/p>\n","protected":false},"excerpt":{"rendered":"Wall Street\u2019s yearslong bet on AI is facing a severe test on Thursday, as investors might begin to…\n","protected":false},"author":2,"featured_media":447334,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[256,2574,254,255,64,63,8551,4851,171,1333,2577,2007,2291,5044,13961,12079,105,1491],"class_list":{"0":"post-447333","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-amazon","10":"tag-artificial-intelligence","11":"tag-artificialintelligence","12":"tag-au","13":"tag-australia","14":"tag-earnings","15":"tag-jim-cramer","16":"tag-markets","17":"tag-meta","18":"tag-microsoft","19":"tag-nasdaq","20":"tag-nvidia","21":"tag-openai","22":"tag-sam-altman","23":"tag-satya-nadella","24":"tag-technology","25":"tag-wall-street"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/447333","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=447333"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/447333\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/447334"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=447333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=447333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=447333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}