Nasdaq Index: Tech Stocks Sink as OpenAI IPO Delay Clouds AI Forecast

OpenAI IPO Delay Hit Chips and Healthcare Caught the Money

At 16:15 GMT Friday the Dow Jones Industrial Average is trading at 51,895.19, down 25.43 or 0.05%. The S&P 500 is at 7,348.43, down 9.06 or 0.12%. The Nasdaq Composite is at 25,280.81, down 77.79 or 0.31%.

The Nasdaq is doing the worst and the reason is sitting in the semiconductor names. Reports that OpenAI may delay its planned IPO until next year raised a question the chip bulls did not want to hear right now: is the AI spending cycle about to slow down.

The S&P opened under its 50-day moving average and has not reclaimed it. The Nasdaq has spent four sessions below its own 50-day. Healthcare is the reason the broader market is not worse. Eli Lilly jumped nearly 6%, Johnson & Johnson climbed more than 3%, and AbbVie added over 2%. The rotation out of tech and into defensive names with steady cash flow was the dominant trade Friday and it showed up across the sector board.

Daily S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index is trading nearly flat as we approach the mid-session on Friday. It seems like traders may be a little reluctant to shed the 50-day moving average at 7363.52, which it opened under. To sellers of weakness, that move should have paid off with a steep follow-through break, but it didn’t. The bears are now being forced to defend that moving average, while the bulls try to recapture it and re-establish the uptrend.

Trader reaction to the 50-day MA will set the tone into the close today. A sustained move over it could fuel a rally into the short-term retracement zone at 7429.38 to 7474.57. A sustained move under it and sellers could try to drive the benchmark index sharply lower with the swing bottom at 7237.85 the primary downside target.

That swing bottom is not only potential support, but also the trigger point for an acceleration to the downside with 6968.90 to 6815.00 the eventual downside target. Inside these moving averages is the 200-day moving average at 6925.05, which is another potential support level.

Daily Nasdaq Composite (IXIC) Technical Analysis

The Nasdaq Composite is lower on Friday and much weaker than the S&P 500 Index. It has spent the last four sessions under the 50-day MA at 25778.38, which is now resistance. Today’s low at 25014.96 is just above the main swing bottom at 24980.38.

Taking out 24980.38 with conviction will reaffirm the downtrend and could trigger an acceleration into the long-term 50% level at 23940.23, the 200-day moving average at 23625.23 and the long-term 61.8% level at 23173.24.

The OpenAI Delay Is Not About One IPO

OpenAI reportedly wants to push its public offering to next year because of disappointing post-IPO performance from other high-profile tech companies and continued volatility in AI-related stocks. The company that kicked off the entire AI spending cycle is looking at the public market and deciding it does not want to be there yet. That is not a confidence signal.

The concern for chip stocks is not about OpenAI’s valuation. It is about what a delay says about the trajectory of AI infrastructure spending. Large technology companies have poured hundreds of billions into data centers, servers, networking equipment and the chips that run all of it. If the company at the center of the AI story is pulling back from the public market, traders start asking whether the spending behind the demand is peaking.

Micron dropped about 2% Friday, one day after surging 15% on blowout earnings. Advanced Micro Devices and Intel each fell roughly 2%. Oracle traded lower. The selling was broad enough across the chip group to offset Micron’s earnings momentum in a single session. That tells you how sensitive this trade has become to any signal that the AI cycle might slow.

Asia Sold Harder Than the U.S. and SoftBank Got Crushed

The AI spending concern hit Asia before the U.S. even opened and the damage was much worse overseas. SoftBank Group plunged more than 12% as one of OpenAI’s largest backers. South Korea’s Kospi dropped nearly 6% and the tech-heavy Kosdaq fell more than 4%. Japan’s Nikkei 225 declined more than 4%. Hong Kong’s Hang Seng lost nearly 2% and mainland China’s CSI 300 also moved lower.

The Stoxx 600 fell about 1% in Europe with technology shares leading the decline. When one report about an IPO delay can take 12% off SoftBank, 6% off the Kospi and 4% off the Nikkei in a single session, it tells you how much of the global equity rally has been built on the assumption that AI spending continues accelerating. Any crack in that assumption gets priced immediately and globally.

The U.S. market held up better than Asia and Europe because the rotation into healthcare and consumer names absorbed some of the tech selling. That defensive bid does not exist in markets where the tech concentration is heavier.

Healthcare Led the Board and It Was Not Close

Healthcare gained roughly 2.7% on the session and led every sector. Eli Lilly’s nearly 6% gain was the standout but Johnson & Johnson at more than 3% and AbbVie at over 2% showed the buying was broad across the group. Consumer discretionary, consumer staples, financials, utilities, communication services and real estate all finished positive.

Technology fell just over 1%. Industrials, materials and energy also closed in the red. Seven sectors up and four down on a day the Nasdaq fell tells you the market is not breaking down. It is making a decision about where to allocate capital and Friday’s answer was healthcare and consumer names over chips and AI.

Consumer Sentiment Improved and Inflation Expectations Fell

The University of Michigan consumer sentiment reading came in at 49.5 in June, slightly above expectations and more than 10% above May. Confidence is still historically weak but the direction changed for the first time in months.

The inflation expectations numbers were more important. Five-year inflation expectations dropped to 3.3% and one-year expectations fell to 4.6%. Lower inflation expectations matter because they can influence how the Fed thinks about future policy. If consumers are expecting less inflation, the pressure on the committee to keep hiking eases. Concerns about the Iran conflict also moderated in the survey, improving business condition expectations.

The sentiment data gave the broader market a reason to hold steady even while the Nasdaq was selling. Improving inflation expectations on the same day the Nasdaq falls on AI spending concerns is the kind of mixed signal that keeps the S&P range-bound rather than breaking down.

What to Watch

The OpenAI IPO delay put a crack in the AI spending narrative and the next round of tech earnings will tell the market whether it widens or heals. Healthcare carried the broader indexes Friday when the chips could not and consumer sentiment improving with inflation expectations falling gives the S&P a reason to hold even if the Nasdaq keeps sliding. The rotation is the story until someone answers the AI spending question definitively.

The S&P 500 opened under the 50-day at 7363.52 and has not reclaimed it. Buyers get that back and the retracement zone at 7429.38 to 7474.57 comes into play. They lose it and the swing bottom at 7237.85 is the downside target with the 200-day at 6925.05 and the 6968.90 to 6815.00 zone below that.

The Nasdaq has been under its 50-day for four sessions with the swing bottom at 24980.38 right underneath Friday’s low. A break there with conviction accelerates toward the 200-day at 23625.23.

More Information in our Economic Calendar.