Investors Turn Against AI Stocks Amid Financial Concerns
Investors significantly offloaded artificial intelligence stocks last week due to rising concerns that OpenAI, the leading AI start-up, might not meet its financial commitments. OpenAI has pledged over $600 billion for computing capacity from major operators like Microsoft and Oracle, yet its annual revenue stands at only $20 billion. This disparity raises fears about the future of the AI sector and could have a broader impact on the market.
The S&P 500 index is currently down slightly from its recent all-time high, facing challenges from both AI-related uncertainties and a deteriorating job market. The U.S. unemployment rate has climbed to 4.4%, nearing a five-year peak, with over 108,000 layoffs reported in January—the highest for that month since 2009. Economists had anticipated 7.2 million job openings in December, but only 6.5 million positions were available, signaling potential economic decline.
As investors weigh the implications of these factors, experts suggest that while corrections in the stock market are normal, the current scenario could lead to a downturn, especially if the job market becomes a harbinger of recession. Any significant decline could set the stage for a possible 10% drop in the S&P 500 index, placing its potential bottom around 6,300.
