US equity futures are lower, dragged by tech, following areportthat OpenAI missed revenue and user targets and there growing internal pushback against Sam Altman's notorious aggressive spending (the company has $1.5 trillion in commitment it won't be able to meet), which is hitting semiconductors and the broader supply chain. AS of 8:15am ET, S&P futures are down 0.7% and Nasdaq futures dropped 1.2% as concerns resurfaced over whether the vast amounts of investment in artificial intelligence will pay off. In pre market trading, Semis and Mag7 are under pressure. Defensives are leading Cyclicals ex-Energy. SoftBank, a key backer of ChatGPT’s owner, plunged 9.9% in Tokyo. US-based OpenAI partners including Oracle and CoreWeave fell in premarket trading. Nvidia was poised to drop 2.9% from a record high. Meanwhile, Brent rose above $111 a barrel, with the Strait of Hormuz still shut. Bond yields are 2-4bps higher as the yield curve flattens and USD appreciates, following the price of oil. Commodities continue to be led by Energy withWTI rising above $100/bblafter Trump signaled he was unlikely to accept Iran’s latest proposal to end the conflict which included a proposed a plan that would reopen the Strait of Hormuz while leaving questions about its nuclear program for later negotiations. There is material weakness in precious metals with silver’s underperformance possibly tied to Tech weakness. Today’s macro data focus is on weekly ADP, home price data, regional Fed activity indicators, and Consumer Confidence (though spending has de-coupled from sentiment). US economic data calendar slate includes weekly ADP employment change (8:15am), February FHFA house price index, S&P CS home prices (9am), April Richmond Fed manufacturing index and Conference Board consumer confidence (10am) and Dallas Fed services activity (10:30am)

In premarket trading, OpenAI partners such as CoreWeave (CRWV -7%) and Oracle (ORCL -7%) are falling after the Wall Street Journal reported that the AI startup recently failed to meet targets for sales and new users, reviving worries about spending ahead of tech earnings. Stocks linked to the buildout of AI infrastructure — from computing providers to the makers of semiconductors and power equipment used in data centers — are also down after the Wall Street Journal report on OpenAI.

In other corporate news, Barclays traders struggled to capitalize on a volatile quarter with returns falling short of their US rivals. Eneos is said to be the last remaining bidder for some of Chevron’s Asian assets in a deal that might be valued at more than $2 billion. Google and the Department of Defense signed a deal allowing the Pentagon to use Google’s AI models on classified work, the Information reported.

Futures are sharply lower after closing at a new all time high yesterday. The market’s hottest theme took a knock from a report that OpenAI failed to meet internal targets, fueling internal concerns that it may struggle to support its spending on AI infrastructure, the WSJ reported. OpenAI partners including Oracle, CoreWeave and AMD fell in premarket trading, while SoftBank tumbled 10% in Japan. Resurgent optimism about AI had prompted the market's charge as the rest of the market lagged due to rising oil prices. Wednesday’s earnings from four hyperscalers will offer the rally another test.

“The single most important line item isn’t revenue or margins; it’s capex,” said Amanda Lyons, IT-sector lead and head of research at Energy Group Capital. “Any hint of slowing spend would be taken negatively for the ecosystem, but a sharp step-up would likely raise questions around returns.”

The WSJ report is reviving worries about how fast companies can monetize their huge AI spending (while still investing enough to compete), leaving Alphabet, Amazon.com, Meta and Microsoft with a delicate message to convey tomorrow. For context, OpenAI revealed in March that it was generating $2 billion in revenue per month, while Bloomberg has reported that Anthropic is on track for annual revenue of almost $20 billion.

“The rising oil price is starting to feature in macro data,” said Anna Macdonald at Hargreaves Lansdown. “The longer the crisis rolls on, the more severe the impacts will be, and the more we expect it will dominate investor attention.”

The AI theme is playing out in other ways too. Battery maker CATL raised $5 billion after a Hong Kong share placement amid surging demand for data center energy storage. The shares have soared 139% since their debut. And Arizona’s data-center building boom is coming up against community opposition and dwindling water availability.

Ahead of this week’s policy meetings by the Federal Reserve, ECB and Bank of England, traders expect officials to keep rates on hold. The outlook gets cloudier for subsequent meetings, with everything hinging on the duration of the Middle East war. Money markets see the ECB and BOE hiking as soon as June, while odds are for the Fed to keep rates on hold for the rest of the year.

Brent advanced for a seventh straight day. The White House said President Donald Trump will address a proposal from Iran to resume oil flows through Hormuz “very soon.” The dollar rose alongside global bond yields. WTI rose above $100 as tankers laden with Iranian oil idle just shy of the US blockade line. There’s not much sign of progress toward ending the war, with Trump planning to address the matter “very soon.” The president has told his advisers he’s not satisfied with Iran’s latest suggestions, the NYT reported, citing people briefed on the discussions.

Source: ZeroHedge News