Semiconductor Stocks Slip as OpenAI Revenue Doubts Surface

A report that rattled the AI trade

Semiconductor stocks began October with momentum and ended the week of October 9 in retreat. The catalyst was a revenue number. On Thursday, the Financial Times reported that OpenAI had told investors its annualized revenue was approaching $50 billion at the end of September. Earlier media reports had put the figure at roughly $70 billion 1. Chip valuations depend heavily on expectations for AI infrastructure spending, so the gap hit the group directly. The PHLX Semiconductor Index closed the week lower while the broader market held up better 1.

The market logic is simple. Chipmakers are not selling to OpenAI's end users. They are selling to the companies building data centers in the expectation that AI applications will make enough money to justify the investment. When the most prominent AI company appears to be earning noticeably less than assumed, investors start asking whether spending further down the supply chain can keep growing as fast.

From record highs to a pullback

The drop is sharper because of where it started. The iShares Semiconductor ETF rose for five straight sessions early in the month, and the sector's largest company reached a record 2. NVIDIA closed at an all-time high on October 5. That left it up about 24.8% for the year and about 14% since its August 26 earnings report 2.

NVIDIA has also held up better than its peers during recent sector weakness. On September 28, chip shares fell on AI safety concerns, but NVIDIA rose. That day it announced a $150 billion share buyback authorization and released two open-source tools meant to help control AI agents 2. Its scale and capital-return capacity appear to cushion it in ways smaller names lack.

Intel faced a different kind of pressure. Its shares fell on October 5 after Elon Musk suggested TSMC could take part in Terafab, a project Intel joined as a partner in April 2. On October 8, Musk said his companies would build and operate the Texas complex themselves 2. For Intel, which depends on landing outside foundry partners, any sign that a high-profile project might involve a rival is a real risk.

TSMC, Arm and Micron were also among the active names that week 1.

Two timelines for the selloff

The accounts differ on how long the weakness has lasted. The week-in-review commentary describes a sector coming off October highs, with the pullback following a stretch of strong gains 12.

Goldman Sachs describes a longer decline. Analysts led by James Schneider said the SOX had dropped 11% over the past two months, while the S&P 500 gained 4% 3. They attributed the slide to significant de-risking 3.

Both accounts can be true. Big index names like NVIDIA can set new records while the broader chip index lags over a longer period. Read together, they suggest the OpenAI report did not start the decline in chip stocks. It added to caution that was already building, after a brief early-October rebound.

Goldman sees opportunity in the reset

Goldman's view is that the de-risking has improved the setup heading into third-quarter earnings. It called this a sharp contrast to its more cautious stance before second-quarter results 3. The bank sees room for estimates to rise across most sub-sectors, especially semiconductor equipment, compute and storage 3.

It named three tactical ideas:

• Applied Materials. Goldman expects the company to raise its margin targets and give a strong growth outlook at SEMICON West on October 13, ahead of mid-November earnings 3. It expects DRAM and advanced logic to drive results, and expects management to describe a wafer fab equipment market growing toward $300 billion over time. The stock has already risen about 12% in a week, so expectations are high 3.
• Seagate. Goldman forecasts about 2% revenue upside and guidance roughly 3% above consensus, helped by firm hard-drive pricing 3. It also cited Seagate's supply discipline and its lead in HAMR technology as reasons it could gain share 3.
• Microchip. It rounds out the list of tactical picks 3.

What it means

The week showed how closely chip stocks now track one company's commercial performance. A single report about OpenAI's revenue moved an entire sector, which shows how much of the semiconductor rally depends on confidence that AI spending will keep paying off.

The divergence among chip stocks matters as much as the headline drop. NVIDIA is supported by its buyback and its market position. Intel is exposed to partnership uncertainty. Equipment and storage companies may be cushioned by demand that does not depend directly on any one AI lab's revenue.

Goldman's argument that de-risking creates a better entry point is reasonable. It also depends on earnings that have not been reported yet. The coming weeks of guidance should show whether the OpenAI figure was a one-time shock or the first sign that AI revenue is falling short of the infrastructure being built for it.