The Nasdaq Composite fell more than 1% on Thursday, leading a broader decline in U.S. stocks as concerns over OpenAI’s reported revenue figures weighed on technology companies. Rising oil prices and uncertainty surrounding global bond markets added further pressure on Wall Street.
The S&P 500 declined 0.5% to close at 7,764.51 points, while the technology-heavy Nasdaq Composite dropped 1.3% to 27,193.34 points. However, the Dow Jones Industrial Average managed a modest 0.1% gain, finishing at 51,231.70 points.
The mixed performance came as U.S. Treasury yields finally retreated from recent highs, despite disappointing demand at a closely watched government bond auction.
Nasdaq Leads Wall Street Decline as Technology Stocks Struggle
Technology stocks faced significant selling pressure after a Financial Times report raised questions about OpenAI’s previously reported revenue figures.
According to the publication, OpenAI’s annualized revenue was approximately $20 billion below earlier estimates shared with investors.
The news contributed to renewed concerns about artificial intelligence valuations and the financial returns generated by massive AI infrastructure investments.
Consequently, the S&P 500 technology sector declined nearly 2%, becoming one of the weakest areas of the market.
King Lip, chief strategist and partner at BakerAvenue Wealth Management, suggested that the broader stock market rally remains intact despite growing challenges.
He highlighted rising borrowing costs and geopolitical uncertainty as significant risks. However, strong corporate earnings and productivity improvements driven by artificial intelligence continue to support the market’s longer-term outlook.
According to Lip, a sustained recovery in equities will depend partly on stabilizing oil prices, easing bond yields, and continued corporate earnings growth.
U.S. Treasury Yields Retreat Despite Weak Bond Auction
Global bond markets remained under pressure Thursday as investors assessed inflation risks, government borrowing requirements, and concerns surrounding European sovereign debt.
However, U.S. Treasury yields eventually moved lower, providing some relief following a prolonged selloff.
The benchmark 10-year Treasury yield declined 5.7 basis points to 5.221%.
Meanwhile, the 30-year Treasury yield fell 5.9 basis points to 5.602%.
The retreat came despite disappointing results from a $22 billion auction of 30-year U.S. government bonds.
The auction produced a higher-than-expected yield, suggesting relatively weak demand for longer-term Treasury securities.
By comparison, Wednesday’s $39 billion auction of 10-year Treasury notes attracted stronger demand, although its yield was the highest for a comparable auction since November 2000.
Rising Government Debt and AI Spending Pressure Bond Markets
Several factors have contributed to the recent increase in global borrowing costs.
Persistent inflation concerns, rising government debt levels, and expectations of tighter central bank policies have encouraged investors to demand higher yields.
Additionally, the enormous financing requirements associated with artificial intelligence infrastructure have become another source of market uncertainty.
The Wall Street Journal reported that Broadcom was seeking more than $50 billion in financing connected to the development of custom AI chips for OpenAI.
Meanwhile, Oracle was reportedly holding discussions with Apollo and Goldman Sachs regarding financing for a major semiconductor purchase.
Separately, the Financial Times reported that Elon Musk’s SpaceX was exploring approximately $40 billion in financing to acquire Nvidia processors.
These developments highlight the growing amount of capital required to support the expansion of artificial intelligence technologies.
Lip noted that the recent decline in Treasury yields could reflect a temporary reduction in selling pressure rather than a lasting market stabilization.
Nevertheless, he suggested that lower and more stable bond yields could provide important support for equities.
OpenAI Revenue Report Raises Questions About AI Investments
The latest OpenAI revenue report introduced additional uncertainty into the technology sector.
According to the Financial Times, financial documents indicated that OpenAI’s annualized revenue was approximately $20 billion lower than previously reported figures.
The discrepancy renewed scrutiny over how rapidly expanding artificial intelligence companies measure revenue and communicate their financial performance.
Investors are increasingly examining whether the enormous amounts being invested in AI infrastructure can generate sustainable profits.
Although demand for artificial intelligence remains strong, concerns have emerged about the relationship between infrastructure spending and actual revenue generation.
Lip suggested that investors are beginning to distinguish between companies investing heavily in AI and those successfully converting that investment into earnings.
However, he emphasized that closer examination of AI profitability does not necessarily signal the end of the technology investment cycle.
Federal Reserve Rate Pause Remains the Most Likely Outcome
Despite elevated Treasury yields, investors continue to expect the Federal Reserve to leave interest rates unchanged at its October meeting.
According to CME Group’s FedWatch Tool, markets assigned approximately an 81% probability to a rate pause.
That compares with roughly 76% one week earlier and 54% a month ago.
Recent U.S. economic figures have influenced these expectations, showing continued economic growth alongside softer inflation and weaker hiring activity.
The Federal Reserve faces the challenge of controlling inflation without causing a significant deterioration in employment conditions.
U.S. Inflation and GDP Data Shape Interest Rate Expectations
Recent inflation figures provided some encouragement for investors hoping that price pressures could moderate.
The U.S. personal consumption expenditures (PCE) price index increased 3.4% year over year in August.
Meanwhile, core PCE inflation, which excludes volatile food and energy prices, rose 3% annually.
Both readings were below market expectations and unchanged from their July levels.
Separately, second-quarter U.S. real gross domestic product growth was revised upward to 2.2%, compared with the previous estimate of 1.5%.
The stronger GDP figure suggested that economic activity remained relatively resilient despite tighter financial conditions.
U.S. Labor Market Data Points to Slower Hiring
Employment figures have also played an important role in shaping Federal Reserve expectations.
The latest nonfarm payrolls report showed that the U.S. economy added just 29,000 jobs in September, marking the weakest hiring pace of 2026.
Additionally, the unemployment rate increased to 4.2% from 4.1% in August.
However, Thursday’s weekly unemployment claims report suggested that layoffs remained relatively limited.
Initial jobless claims declined to 197,000 for the week ending October 3, reaching their lowest level since the week ending July 18.
The four-week moving average also decreased to 198,000.
Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, suggested that the latest figures reflected a labor market characterized by limited hiring and relatively low layoffs.
He argued that these conditions could allow the Federal Reserve to maintain its focus on bringing inflation under control.
Meanwhile, minutes from the Fed’s September policy meeting showed that most officials still considered another interest rate increase appropriate before the end of the year.
Oil Prices Rise as Trump Addresses Iran Conflict
Geopolitical developments added another layer of uncertainty to Thursday’s trading session.
Oil prices climbed sharply amid renewed concerns about potential U.S. military strikes against Iran and disruptions to Middle Eastern energy supplies.
However, crude oil futures retreated from their session highs after President Donald Trump said Washington would not attack Iran before the November 3 U.S. midterm elections.
Trump also indicated that discussions between the United States and Iran were progressing.
Despite the diplomatic comments, he maintained that restrictions on Iranian oil shipments would remain in place.
Strait of Hormuz Tensions Keep Energy Markets Volatile
Brent crude futures were trading approximately 3.3% higher at $103.55 per barrel during the afternoon session.
Earlier, the international oil benchmark had recorded stronger gains as concerns intensified over attacks on commercial vessels passing through the Strait of Hormuz.
Additional uncertainty followed reported strikes by Iran-backed Houthi forces against important infrastructure in Saudi Arabia.
The developments renewed concerns about the security of global energy shipments and the possibility of prolonged supply disruptions.
Higher oil prices can also contribute to inflation, potentially complicating the Federal Reserve’s efforts to stabilize consumer prices.
Consequently, developments in the Middle East remain an important influence on both energy markets and U.S. equities.
Chipotle Shares Jump as Starbucks Takeover Speculation Emerges
Several individual stocks attracted attention during Thursday’s session despite the broader market weakness.
Chipotle Mexican Grill shares surged more than 6%, making the restaurant chain one of the S&P 500’s strongest performers.
The rally followed a Financial Times report suggesting that Starbucks had explored a potential acquisition of Chipotle.
According to people familiar with the matter, Starbucks had worked with advisers in recent months to evaluate a possible takeover proposal.
However, it remained unclear whether the company had formally submitted an offer or whether discussions were continuing.
Starbucks shares declined approximately 0.4% following the report.
PepsiCo Stock Gains Following Q3 Earnings Beat
Elsewhere, PepsiCo shares advanced nearly 4% after the beverage and snack manufacturer reported stronger-than-expected quarterly results.
The company exceeded Wall Street forecasts for both revenue and earnings during the third quarter.
However, PepsiCo also lowered its full-year profit outlook, highlighting ongoing pressure on operating margins and business expenses.
Despite the weaker guidance, investors responded positively to the company’s quarterly performance.
Attention will now shift toward the upcoming U.S. earnings season, with several major American banks scheduled to release financial results next week.
Stock Market Outlook: Can the Nasdaq Recover?
The latest Wall Street session highlights several challenges facing U.S. equities, particularly technology stocks.
The Nasdaq’s 1.3% decline reflects growing investor scrutiny of artificial intelligence companies, while elevated borrowing costs and geopolitical risks continue to influence market sentiment.
Nevertheless, the retreat in Treasury yields and expectations of a Federal Reserve rate pause could provide some support for stocks.
Looking ahead, investors will closely monitor upcoming corporate earnings, developments in U.S.-Iran relations, and further signals from Federal Reserve officials.
Technology companies will also face increasing pressure to demonstrate that substantial AI investments can translate into sustainable revenue and profitability.
For now, Wall Street remains caught between encouraging corporate growth prospects and mounting concerns over inflation, interest rates, and geopolitical uncertainty.
