AI stocks crumble on report that OpenAI’s annualized revenue is much lower than believed

Technology stocks experienced a sharp decline on Friday, following a report from the Financial Times claiming that AI leader OpenAI Group PBC's annualized revenue for the year is approximately $20 billion lower than previously reported. The Financial Times revealed that OpenAI recently disclosed to potential investors that its annualized revenue was around $50 billion, in stark contrast to the $68 billion figure that had been widely reported two months prior.

The discrepancy in reported revenue figures has left investors questioning whether the demand for AI will be strong enough to justify the high valuations of OpenAI and its rival Anthropic PBC, both of which are preparing for initial public offerings (IPOs) to capitalize on the AI boom. The Nasdaq index dropped 1.25% in a single day, its worst performance since mid-August, while the broader S&P 500 fell 0.5%, largely due to a decline in tech-related stocks.

OpenAI officials reportedly provided the $50 billion figure during an investor presentation, whereas the earlier $68 billion figure included gross revenue from OpenAI's partners, aiming to provide a more direct comparison to numbers reported by Anthropic. The newer figure was based on net revenue. OpenAI also highlighted 77% growth in its annual revenue run rate during the third quarter and a 107% growth in run rate for its enterprise business.

However, the revelation has raised concerns about OpenAI's ability to fulfill its contractual obligations, potentially impacting the entire industry. Many tech stocks have been booming this year based on the assumption that demand for AI will continue growing, but the news of lower-than-expected revenue could send shockwaves throughout the sector.

OpenAI, valued at $852 billion, is preparing for one of the most anticipated IPOs in history, but its ability to justify its valuation may be called into question. Anthropic, another AI giant, is still expected to go public in 2026, with a target valuation of $2 trillion.