S&P 500 diverges as AI stocks slump on valuation concerns
The S&P 500 fell 0.5% for the week despite 337 constituents closing higher, a split driven by a sharp decline in artificial intelligence heavyweights. Market anxiety intensified following Meta's capital structure filing and reports of a lower-than-expected valuation for OpenAI.
The S&P 500 experienced a rare divergence this week, falling 0.5% overall while 337 of its 500 constituents closed higher on Thursday. This disconnect was primarily driven by heavy losses in AI-heavyweights, with Goldman Sachs' AI Index dropping 25% from its recent high. Market sentiment was weighed down by a Form 14C filing from Meta, which outlined a new share class allowing CEO Mark Zuckerberg to raise capital without diluting his voting rights below 50%, despite the company reporting 2 billion in negative cash flow. Simultaneously, reports indicated that OpenAI is raising 30 billion at a 1.25 trillion valuation, a figure lower than previous estimates of 1.4 to 1.5 trillion. This adjustment has raised questions regarding the sustainability of Anthropic's potential 2 trillion valuation. The Philadelphia Semiconductor Index ended the week up 3.2%, recovering from a near 7% single-day drop, with Nvidia down 1.5%, Micron flat, and TSMC up 1.4%. Among the notable losers were Larm Research, which fell 13%, Core Rent, down 10%, and Arm Holdings, down 7%. SpaceX shares lost 8% on Friday after the company announced plans to become a serious mobile carrier. In the fixed-income market, US 10-year yields fell below 5% for the first time, prompting retail investors to shift allocations from equities to bonds.