US stocks slid Thursday as a sharp jump in oil prices revived worries that inflation could keep interest rates higher for longer. The tech-heavy Nasdaq fell 1.24%, while the broader market moved less, as investors weighed the impact of rising energy costs and fresh questions about the finances of OpenAI, the company behind ChatGPT.
Oil's jolt
Crude prices rose sharply, with front-month WTI and Brent gaining 3.6% and 4.1% respectively. The move came after attacks near the Strait of Hormuz, a critical shipping lane for global oil, and as hurricane-related disruptions cut US output. Energy prices feed quickly into headline inflation, and with investors already on edge about price pressures, the jump in crude pushed Treasury yields higher.
Higher yields matter for stock valuations because they raise the “discount rate” markets use to value future profits. When that rate goes up, the present value of future earnings falls, and growth stocks—which promise big profits far in the future—tend to be hit hardest. That dynamic helps explain why the Nasdaq fell more than the broader market.
OpenAI's funding questions
Tech shares had their own problems. A Financial Times report said OpenAI's annualized revenue was $20 billion below what it had previously signaled. Meanwhile, the Wall Street Journal reported that Broadcom is lining up $50 billion of financing for OpenAI, with Oracle also seeking an unspecified amount. That points to the next phase of AI spending leaning more on outside funding than the market had assumed.
When borrowing costs are elevated, funding-heavy plans look riskier. Lenders demand more compensation, and companies may have to raise money on less attractive terms. That can lead analysts to trim expectations for the pace of AI capital spending and the profits suppliers can earn from it. Chip stocks, which have been big beneficiaries of the AI boom, felt the brunt of these concerns.
What it means for investors
AI stocks have been priced for a smooth path from big demand to real profits. If a key customer is generating less revenue than investors thought and needs large-scale financing to keep expanding, the story shifts toward execution and balance-sheet risk.
That's especially important with Treasury yields near multi-year highs. Higher “risk-free” rates can squeeze valuation multiples, and debt-funded growth becomes harder to justify. In that setup, OpenAI-linked names like Broadcom and Oracle, plus the PHLX Semiconductor Index (SOX), can react more sharply to earnings estimate cuts and to signs that AI spending arrives later, or at lower margins, than expected.
For everyday investors, the takeaway is that the market is now paying close attention to two things: the path of oil prices and the funding needs of AI companies. Both have the power to move markets in the coming weeks. As oil surges to $104 pressure the Nasdaq, and with Fed officials warning that more rate hikes may be needed, the environment for growth stocks remains challenging.
Investors should also keep an eye on how other markets are reacting. Saudi stocks slipped as Hormuz attacks stoke supply fears, and TSX futures hit a 3-month low as bond yields and oil stoked inflation fears. These moves show that the oil shock is a global concern, not just a US one.
Ultimately, the market is in a delicate spot. Oil prices are rising, rates are elevated, and the AI trade is facing its first real test of credibility. How these three forces play out will likely determine the direction of stocks in the near term.
