OpenAI loses force as stock market savior

Wall Street’s sentiment toward companies associated with artificial intelligence is shifting, and it’s all about two companies: OpenAI is down, and Alphabet Inc. is up.

- BY RYAN VLASTELICA

JUSTIN SULLIVAN Getty Images

OPENAI CEO Sam Altman has declared a "code red" to boost ChatGPT.

The maker of ChatGPT is no longer seen as being on the cutting edge of AI technology and is facing questions about its lack of profitability and the need to grow rapidly to pay for its massive spending commitments. Meanwhile, Google’s parent is emerging as a deep-pocketed competitor with tentacles in every part of the AI trade.

“OpenAI was the golden child earlier this year, and Alphabet was looked at in a very different light,” said Brett Ewing, chief market strategist at First Franklin Financial Services. “Now sentiment is much more tempered toward OpenAI.”

As a result, the shares of companies in OpenAI's orbit — principally Oracle Corp., CoreWeave Inc. and Advanced Micro Devices Inc. but also Microsoft Corp., Nvidia Corp. and SoftBank, which has an 11% stake in the company — are coming under heavy selling pressure. Meanwhile, Alphabet’s momentum is boosting not only its stock price but also those it’s associated with, such as Broadcom Inc., Lumentum Holdings Inc., Celestica Inc. and TTM Technologies Inc.

The shift has been dramatic in magnitude and speed. Just a few weeks ago, OpenAI was sparking huge rallies in any company related to it. Now, those connections look more like an anchor.It's a change that carries wide-ranging implications, given how central the closely held company has been to the AI mania that has driven the stock market’s three-year rally.

“A light has been shined on the complexity of the financing, the circular deals, the debt issues,” Ewing said. “I'm sure this exists around the Alphabet ecosystem to a certain degree, but it was exposed as pretty extreme for OpenAI's deals, and appreciating that was a game-changer for sentiment.”