The mood in the Wall Street pre-market is one of strong risk aversion. Investors are reacting pessimistically to reports that OpenAI may delay its highly anticipated initial public offering (IPO), which has reignited doubts about actual financial returns compared to the astronomical infrastructure costs of Artificial Intelligence (AI).
At 8:02 AM ET, Dow Jones index futures are down 38 points, or 0.07%. S&P 500 futures are down 34.50 points, or 0.46%. Nasdaq futures are dropping 342.25 points, or 1.15%. The 10-year Treasury yield is down to 4.382%.
Volatility is amplified by a shift in macroeconomic expectations, as the market digests the possibility of further interest rate hikes by the Federal Reserve (Fed).
Friday’s economic calendar begins with the release of preliminary data for the Goods Trade Balance and Wholesale Inventories for May, both published at 9:30 AM ET.
At 11:00 AM ET, the final June data from the University of Michigan (UoM) will be released, including the Consumer Sentiment Index and, most notably, the 1-year Inflation Expectations (projected at 4.6%) and 5-year Inflation Expectations (projected at 3.4%).
Shortly after, FOMC members will speak: Williams at 11:30 AM ET and Kashkari at 12:30 PM ET.
The OpenAI Effect and the Semiconductor Tumble
According to The New York Times, OpenAI is considering delaying its IPO. Reasons include the weak performance of SpaceX shares following its market debut and fears of sector volatility. JPMorgan and market analysts warn that this could slow down investments in technological infrastructure.
As a result, the chip and memory sector suffered sharp global losses:
Top Losses in Focus (US & Global)
- On Semiconductor (NASDAQ:ON): ↓ Drops more than 14% (after announcing the acquisition of Synaptics for $7 billion in stock).
- Micron Technology (NASDAQ:MU) and SanDisk (NASDAQ:SNDK): ↓ Fall around 4.8% (giving back part of the previous day’s gains).
- Arm Holdings (NASDAQ:ARM), Marvell Technology (NASDAQ:MRVL), Advanced Micro Devices (NASDAQ:AMD), and Intel (NASDAQ:INTC): Decline between 3% and 4%.
- SoftBank Group (Asia): ↓ Led losses in the region with a decline of over 12%, reflecting its heavy exposure as an OpenAI investor.
- ASML & Infineon (Europe): Drop 1.4% and 3.6%, respectively.
Oil in Free Fall
Despite rising geopolitical tensions in the Persian Gulf—following reports of an attack attributed to Iran against a Singaporean cargo ship in the Strait of Hormuz—investInvestors preferred to focus on the risks of a global economic slowdown, pushing energy commodities downward.
At 8:12 AM ET, Brent crude oil contracts for August are down 3.4%, trading at $72.73 a barrel. US WTI crude oil is down 3.1%, trading at $69.73 a barrel.
- Energy Stocks: APA Corporation, Diamondback Energy, and Occidental Petroleum are trading down 1% to 1.5%.
Gold Attempts to Stabilize
The precious metal is attempting a slight technical recovery today, driven by US inflation data that came in flat, but the medium-term outlook remains challenging.
Despite the daily gain, trading at $4,063, gold is on track to close its fourth consecutive week of losses, pressured by the specter of higher US interest rates. Silver follows the slight upward movement today, but also closes the week in negative territory.
Against the Trend: Positive Highlights
Amid the sea of red, a few companies managed to post gains in the pre-market:
- Synaptics (NASDAQ:SYNA): Rises 4.8% (boosted by On Semiconductor’s acquisition announcement).
- Rocket Lab (NASDAQ:RKLB): Rises 1.1% (after securing a NASA contract for launch services for two solar and climate research missions).
- Apple (NASDAQ:AAPL): Rises 0.7% (attempting a slight technical recovery after plunging 6.12% in the previous session, driven by price increases for iPads and MacBooks due to component costs).