Alphabet holds up as AI sell-off hits builders and chip suppliers

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Alphabet holds steady in AI sell-off

Highlights

OpenAI's annualized revenue estimate dropped from nearly $70 billion to $50 billion, triggering an AI sector sell-off and concerns over return timing for heavy infrastructure spending.
Nvidia and Micron fell 5% to 7% over a week as investor focus shifted to capital constraints facing heavily financed AI builders like Oracle and CoreWeave, pressuring related chip suppliers.
Alphabet, benefiting from direct AI service sales and robust cash flow, outperformed as investors favored platforms with strong cash positions over leveraged builders during the AI market correction.

Revenue reset sharpens focus on AI funding

As reported by Weiss Ratings, the latest sell-off follows Reuters' report that OpenAI told investors its annualized revenue is running at nearly $50 billion after earlier signaling close to $70 billion, raising new questions about whether companies building out AI capacity get paid quickly enough to justify heavy spending.

The pressure is falling first on companies tied most directly to the financing of the buildout. Oracle and CoreWeave are expanding data center capacity with significant borrowing, and the article says about half of Oracle's backlog is tied to OpenAI. When OpenAI's revenue pace comes in below earlier indications, investors reassess not only those builders but also the chip suppliers that depend on their orders.

That pattern is now visible in market moves. Nvidia and Micron have fallen about 5% to 7% over a week, while Alphabet, Microsoft and Amazon have risen. Broadcom's chief executive also says on Monday that capital, rather than chips, is becoming the main constraint on AI growth, reinforcing the idea that funding risk is overtaking hardware scarcity.

Platforms benefit from paying customers and cash flow

The International Monetary Fund warns Tuesday that an AI correction could be global, and points to rising debt among large cloud groups. The fund says companies such as Amazon, Alphabet and Meta now account for about 10% of global corporate bond issuance among highly rated borrowers, up from less than 1% in 2024, showing how much leverage is entering the sector.

Even so, the article argues the market is distinguishing between leveraged builders and platform companies with direct customer demand. Reuters says Anthropic generated more revenue than OpenAI in the second quarter, while Bloomberg reports OpenAI still expects to reach $70 billion in revenue by year-end. In that view, demand for AI services remains intact, but investors are becoming more selective about which business models capture the cash.

Weiss keeps Buy ratings on several chipmakers and major platforms, but rates Oracle a hold and CoreWeave a sell. Alphabet stands out in the analysis because it sells AI through Search, cloud services and Gemini, while maintaining stronger cash generation and a larger cash position relative to debt. The article says that resilience, rather than a broader retreat from technology, is helping the stock outperform during the latest AI-driven market shakeout.

In our earlier article on how AI adoption is affecting wages and financing conditions in the euro area, we outlined ECB chief economist Philip Lane’s view that AI could weaken workers’ bargaining power and help moderate wage growth. We also noted that heavy corporate borrowing to fund AI investment is tightening credit conditions and lifting long-term yields, with potential spillovers into policy decisions as financing becomes a bigger constraint on the AI buildout.

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