Selling pressures: A trader works the floor at the New York Stock Exchange. OpenAI is no longer seen as being at the cutting edge of AI technology and is facing questions about its lack of profitability. — Bloomberg
NEW YORK: Wall Street’s sentiment towards companies associated with artificial intelligence (AI) is shifting, and it centres on two firms: OpenAI is down, and Alphabet Inc is up.
The maker of ChatGPT is no longer seen as being at 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 substantial spending commitments.
Meanwhile, Google’s parent is emerging as a deep-pocketed competitor with reach into every part of the AI trade.
“OpenAI was the golden child earlier this year, and Alphabet was viewed in a very different light,” said Brett Ewing, chief market strategist at First Franklin Financial Services.
“Now sentiment is much more tempered towards 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 holds an 11% stake in the company – are coming under heavy selling pressure. Meanwhile, Alphabet’s momentum is boosting not only its own stock price, but also those of associated firms such as Broadcom Inc, Lumentum Holdings Inc, Celestica Inc, and TTM Technologies Inc.
The shift has been dramatic in both magnitude and speed. Just a few weeks ago, OpenAI was sparking huge rallies in any company linked to it. Now, those connections look more like an anchor.
It is a change with 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 shone 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.”
A basket of companies connected to OpenAI has gained 74% in 2025, which is impressive but far short of the 146% jump by Alphabet-exposed stocks. The technology-heavy Nasdaq 100 Index is up 22%.
The scepticism surrounding OpenAI can be traced back to August, when it unveiled GPT-5 to mixed reactions.
It intensified last month when Alphabet released the latest version of its Gemini AI model, which received rave reviews.
As a result, OpenAI chief executive officer Sam Altman declared a “code red” effort to improve the quality of ChatGPT, delaying other projects until its signature product is brought up to standard.
Alphabet’s perceived strength goes beyond Gemini. The company has the third-highest market capitalisation in the S&P 500 and significant cash reserves.
It also has a host of adjacent businesses, such as Google Cloud and a semiconductor manufacturing operation that is gaining traction.
And that is before considering the company’s AI data, talent and distribution, or its successful subsidiaries like YouTube and Waymo.
“There is a growing sense that Alphabet has all the pieces to emerge as the dominant AI model builder,” said Brian Colello, technology equity senior strategist at Morningstar.
“Just a couple of months ago, investors would have given that title to OpenAI. Now there is more uncertainty, more competition, more risk that OpenAI is not the slam-dunk winner.”
Representatives for OpenAI and Alphabet did not respond to requests for comment.
The difference between being in first or second place goes beyond bragging rights. It also has significant financial ramifications for the companies and their partners.
For example, if users gravitating towards Gemini slow ChatGPT’s growth, it will be harder for OpenAI to pay for cloud-computing capacity from Oracle or chips from AMD.
By contrast, Alphabet’s partners in building out its AI effort are thriving.
Shares of Lumentum, which makes optical components for Alphabet’s data centres, have more than tripled this year, putting them among the 30 best performers in the Russell 3000 Index.
Celestica provides the hardware for Alphabet’s AI buildout, and its stock is up 252% in 2025. Meanwhile, Broadcom, which is building the tensor processing unit (TPU) chips Alphabet uses, has seen its stock price leap 68% since the end of last year.
OpenAI has announced a number of ambitious deals in recent months.
The flurry of activity “rightfully brought scrutiny and concern over whether OpenAI can fund all this, whether it is biting off more than it can chew”, Colello said.
“The timing of its revenue growth is uncertain, and every improvement a competitor makes adds to the risk that it cannot reach its aspirations.”
In fairness, investors greeted many of these deals with excitement, because they appeared to mint the next generation of AI winners.
But with the shift in sentiment, they are suddenly taking a wait-and-see attitude.
“When people thought it could generate revenue and become profitable, those big deal numbers seemed possible,” said Brian Kersmanc, portfolio manager at GQG Partners, which has about US$160bil in assets.
“Now we are at a point where people have stopped believing and started questioning.”
Kersmanc sees the AI euphoria as the “dot-com era on steroids”, and said his firm has gone from being heavily overweight in tech to highly sceptical.“We are trying to avoid areas of over-hype, and a lot of those were fuelled by OpenAI,” he said.
“Since a lot of places have been touched by this, it will be a painful unwind. It is not just a few tech names that need to come down, though they are a huge part of the index.
“All these bets have parallel trades, like utilities, with high correlations. That is the fear we have – not just that OpenAI spun up this narrative, but that so many things were lifted on the hype.”
OpenAI’s public relations flaps have not helped. The start-up’s chief financial officer, Sarah Friar, recently suggested the US government “backstop the guarantee that allows the financing to happen”, which raised some eyebrows.
But she and Altman later clarified that the company has not requested such guarantees.
Then there was Altman’s appearance on the “Bg2 Pod”, where he was asked how the company can make spending commitments that far exceed its revenue.
“If you want to sell your shares, I will find you a buyer – I just, enough,” was the CEO’s response.
Altman’s dismissal was problematic because the gap between OpenAI’s revenue and its spending plans between now and 2033 is about US$207bil, according to HSBC estimates.
“Closing the gap would need one or a combination of factors, including higher revenue than in our central case forecasts, better cost management, incremental capital injections, or debt issuance,” analyst Nicolas Cote-Colisson wrote in a research note on Nov 24.
Considering that OpenAI is expected to generate revenue of more than US$12bil in 2025, its compute cost “compounds investor nervousness about associated returns”, not only for the company itself, but also “for the interlaced AI chain”, he wrote. — Bloomberg
