Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday.
Today is Wednesday, April 29th.
Yesterday I talked about the rise of CPUs and the new relationship between CPUs and GPUs — what I'm affectionately calling the Empire Strikes Back.
Today I want to talk about the market sell-off.
Riding a Mechanical Bull
For the past 30 days the market has been going gangbusters.
Then the last two days — a hard sell-off.
An old timer on Wall Street used to tell me that getting through a new technology rollout is like riding a mechanical bull.
You don't know which way it's going to throw you next.
Up, down, up, down.
It's crazy.
So why is the tech sector suddenly selling off?
The OpenAI Miss
The trigger here is reporting from the Wall Street Journal, the Information, and other sources saying that OpenAI missed an internal revenue target in the first quarter.
They also previously missed user growth goals for ChatGPT.
The reason is stiff competition.
Google's Gemini had a big fourth quarter last year — I talked about it in these videos, I noticed the difference myself as a user.
Anthropic has had momentum in the first quarter of this year.
It is a very tight race, and every single quarter a different company has the momentum.
Now, this internal miss does not necessarily mean OpenAI is going to miss its full year revenue target of $30 billion — up from around $13 billion in 2025.
But the market doesn't wait for clarification when stocks are priced for perfection.
The $1.15 Trillion Problem
Here is what makes this more than just a one-quarter story.
A blogger named Tomasz Tunguz, who runs a site called the Decoder and seems to be very plugged into the tech world, has reported that OpenAI has committed roughly $1.15 trillion in hardware and cloud infrastructure spending between 2025 and 2035.
Broken down across seven major vendors:
Broadcom, $350 billion.
Oracle, $300 billion.
Microsoft, $250 billion.
Nvidia, $100 billion.
AMD, $90 billion.
Amazon AWS, $38 billion.
CoreWeave, $22 billion.
When OpenAI's growth slows, all of those commitments come into question.
And when those commitments come into question, the dominoes start to fall.
Less storage.
Less cloud.
Less chips.
Oracle, Broadcom, Nvidia — bang, bang, bang, all the way down the line.
That’s a big reason why we’ve been recommending a much “safer” way to play the AI boom - one that doesn’t fall like a domino when a single private company has a bad quarter…
Like all technology, AI needs energy.
Every single one of these companies — OpenAI, Microsoft, Google, Nvidia — needs more power than the grid was ever built to handle.
Every time a new data center gets built, every time a new chip plant comes online, oil has to pass through them.
Priced for Perfection
This is what we mean when we say a stock is priced for perfection.
It is priced as if everything is going to unfold exactly as planned.
I've been alive long enough to know that's not how the world works.
No plan survives first contact.
As Mike Tyson puts it — everyone has a plan until they get punched in the face.
When stocks are priced for perfection, the hint of something going wrong is enough to send investors running.
They shoot first and ask questions later.
A Word on AMD and ARM
This also speaks to what we were talking about the othe day.
AMD up 70-something percent in 30 days.
ARM Holdings up 70-something percent.
Intel up even more.
Look, I hate to disappoint you — but nothing goes straight up.
In classical technical analysis, when something goes straight up, it should come back about a third, consolidate, and then either march higher or lower.
I'm not a technical analyst and I don't use charts to buy companies.
But I can tell you that human beings watching these charts think exactly this way.
The repricing was coming.
This is a developing story and we are going to keep a very close eye on it.
Anyway, that's all I have for you today.
Have a wonderful day.
I will see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine