The swings were driven largely by technology and high-momentum sectors, including AI-focused stocks, cryptocurrencies, and other previously strong performers. Analysts noted that uncertainty over whether AI investments will generate promised economic returns and questions about future Federal Reserve interest rate policy continue to unsettle investors.

Tech Stocks Lead the Decline

Nvidia, a bellwether for AI-driven technology, initially rose 5% following strong quarterly earnings and an optimistic revenue forecast. Analysts at UBS, led by Timothy Arcuri, suggested that Nvidia’s robust guidance could support higher stock prices, noting that “the AI infrastructure tide is still rising so fast that all boats will be lifted.”

Despite these gains, Nvidia ultimately fell 3.2%, highlighting the stock’s significant influence on the S&P 500 due to its market capitalization. Other AI-linked companies experienced similar volatility. Palantir Technologies swung from an early gain of 5.5% to a 5.8% loss, while Amazon shares reversed a 2.1% rise to end down 2.5%.

Investors remain cautious about the broader AI sector, questioning whether heavy investment in chips and data centers will translate into meaningful long-term profits. Nvidia forecasts $65 billion in chip sales over the next quarter, but uncertainty persists over the economic impact for companies relying on these technologies.

Cryptocurrency and Market Sentiment

Cryptocurrencies also weighed on the market, with Bitcoin dropping below $87,000, down from nearly $125,000 earlier last month. Companies linked to the crypto sector faced steep declines: Robinhood Markets fell 10.1% and Coinbase Global lost 7.4%.

According to a Bank of America survey of global fund managers, a record proportion of investors believe companies are overinvesting, reflecting a cautious sentiment toward both tech and AI-related sectors.

Interest Rate Uncertainty Remains

The second factor affecting markets is uncertainty around Federal Reserve policy. Thursday’s U.S. jobs report offered a mixed signal: stronger-than-expected hiring in September indicated ongoing economic resilience, but a slight rise in the unemployment rate left open the possibility of future rate adjustments.

Traders currently assign roughly a 40% probability to a Fed rate cut in December, slightly higher than the 30% chance noted the previous day, according to CME Group data. Market expectations for continued rate cuts have supported stock prices earlier in the year, but persistent inflation above the Fed’s 2% target remains a constraint.

Winners and Losers in the Session

Retailer Walmart was among the few winners on Thursday, rallying 6.5% after reporting strong quarterly sales and profits that exceeded analyst expectations. The company continues to benefit from steady consumer spending, even amid broader economic concerns.

However, the gains from Walmart were overshadowed by losses in technology and crypto sectors, which remain highly sensitive to changes in investor sentiment and policy expectations.

The S&P 500 closed at 6,538.76, down 103.40 points, the Dow fell to 45,752.26, and the Nasdaq ended at 22,078.05, down 486.18 points. Meanwhile, the yield on the 10-year Treasury eased to 4.09% from 4.13% late Wednesday, reflecting investor recalibration toward fixed-income markets.

Global Market Reactions

Outside the U.S., markets posted gains as investors responded to regional economic and corporate data. Japan’s Nikkei 225 rose 2.6%, while South Korea’s Kospi increased 1.9%. European markets also saw modest advances, suggesting that global equities remain influenced by regional dynamics and corporate earnings reports.

Source: AP News – Big swings keep rocking Wall Street as US stocks drop sharply after erasing a morning surge

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In a move aimed at securing more investment and keeping pace with the rapidly evolving AI landscape, OpenAI announced on Monday that it will remain under the control of its nonprofit parent. However, the company plans to restructure its for-profit arm to help raise additional capital necessary for advancing artificial intelligence (AI) technology.

This decision comes after a whirlwind of criticism and legal challenges, including a high-profile lawsuit from Elon Musk. Musk and others have accused OpenAI of drifting from its original mission to develop AI that benefits humanity.

In a blog post, OpenAI explained that it chose to keep the nonprofit in charge after consulting with civic leaders and engaging in discussions with the Attorneys General of California and Delaware. The company emphasized that it would work closely with its major backer, Microsoft, along with regulators and newly appointed nonprofit commissioners, to finalize the new structure.

The Push for More Capital

OpenAI had initially planned in December to transform into a public benefit corporation, which would allow the organization to raise more capital and reduce restrictions imposed by its current nonprofit framework. This move raised concerns about the allocation of assets between the nonprofit and for-profit arms and the balance between making profits and serving the public good, especially as OpenAI pushes the boundaries of AI development.

On Monday, the company clarified that the nonprofit will continue to control the public benefit corporation, making it a major shareholder in the newly structured entity. Public benefit corporations offer more flexibility than traditional nonprofits, allowing them to pursue profits while still focusing on social impact.

A Compromise That Works for Investors

Bret Taylor, OpenAI’s board chairman, called the announcement a “compromise” that preserves much of the existing structure. CEO Sam Altman echoed this sentiment, describing it as a solution that satisfies investors while ensuring enough funding to continue its ambitious AI projects.

OpenAI has been facing increasing pressure to attract more investment in the race to develop artificial general intelligence (AGI) — AI that surpasses human intelligence. The startup plans to raise up to $40 billion in a funding round led by SoftBank Group, with a projected $300 billion valuation. This round, however, hinges on OpenAI’s transition to a for-profit model by the end of the year.

Raising Capital and Investor Concerns

Despite the announcement, some analysts remain skeptical about OpenAI’s ability to raise capital as efficiently with nonprofit control in place. Gil Luria, an analyst at D.A. Davidson, pointed out that “the nonprofit status significantly reduces OpenAI’s ability to raise capital,” as investors typically seek a return on investment, something harder to achieve with a nonprofit structure.

A History of Drama and Change

OpenAI’s governance structure gained attention in November 2023 after a dramatic boardroom shakeup that saw Altman ousted for a brief period over trust and communication issues. His reinstatement, after a wave of support from employees and investors, was a defining moment for the company, highlighting the challenges of balancing its nonprofit roots with the demands of rapidly expanding in a commercial market.

With this new restructuring plan, OpenAI aims to strike a delicate balance between maintaining its original mission and scaling up to meet the growing demand for advanced AI technology. Whether the move will satisfy all stakeholders, however, remains to be seen.

Source: CNN – OpenAI to remain under non-profit control in change of restructuring plans

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