Wall St slides over AI jitters; UAE quits OPEC

Tech stocks were back on the red side of the ledger on Wall Street as a report that ChatGPT-maker OpenAI missed its own revenue and user targets revived fears about the massive investment in artificial intelligence infrastructure ahead of earnings from five of the Magnificent 7 megacap stocks in coming days.

Meanwhile, oil prices continued to climb as US President Donald Trump was sceptical about an Iranian proposal to reopen the Strait of Hormuz while the United Arab Emirates said it would leave the Organization of Petroleum Exporting Countries.

Earnings season continued in the US, with Coca Cola and automaker General Motors among the day’s gainers after they beat analysts’ expectations, while United Parcel Service declined as it fell short of forecasts.

And locally, Australian inflation data will be in focus with futures pointing to a soft start to the day for the ASX, while New Zealand’s Reserve Bank governor Anna Breman is due to speak in a panel discussion.

Tech jitters

The tech-heavy Nasdaq Composite fell 0.8% in late trading as investors were spooked by a Wall Street Journal report that OpenAI fell short of revenue and user targets in the run-up to a potential initial public offering later this year.

The Roundhill Magnificent Seven exchange traded fund was down 0.3% ahead of quarterly results from Amazon, Microsoft, Meta Platforms and Alphabet on Wednesday in the US, with Apple to report the following day.

NZX-listed infrastructure investor Infratil has been a beneficiary of the AI boom due to its investment in the CDC data centre business. It’s up 5.1% so far this month.

Sentiment on Wall Street was broadly softer, with the Dow Jones Industrial Average down 0.1%, with Sherwin-Williams, Cisco Systems and Home Depot at the bottom of the leaderboard, while the S&P 500 declined 0.5%.

Stocks were mixed across the Atlantic, with the UK’s FTSE 100 nudging up 0.1%, while Germany’s DAX slipped 0.3% and France’s CAC 40 fell 0.5%.

Brent crude oil futures rose 2.8% to US$111.25 a barrel at 7am in Auckland as US President Trump had a lukewarm response to Iran’s proposal to reopen the Strait of Hormuz as the stalemate in the Middle East continues. The Polymarket prediction market is pricing in a 30% chance for a permanent peace by the end of May and a 44% chance of a deal by the end of June.

Old rivalries

Meanwhile, the UAE said it would leave OPEC next month, with the latest conflict and resulting disruption to supply chains providing an opportunity for the nation’s exit. The UAE had found itself at odds with OPEC heavyweight Saudi Arabia in recent years over a desire to boost production.

“The decision reflects a long‑running push by the UAE for greater flexibility, and signals that for high‑capacity producers the value of independence may now outweigh the benefits of formal coordination,” ANZ New Zealand economists said in a note. “With geopolitical tensions front and centre, the reaction in oil markets was muted. However, with UAE production capacity sitting around 4.8 million barrels a day, the longer‑run consequences could be substantial.”

Energy major BP rallied after reporting a strong rise in first-quarter profit, with its trading division taking advantage of the volatility in oil markets. Chevron and Exxon Mobil were among Wall Street’s gainers, with both due to report later this week.

The subdued mood is set to continue into the antipodes, with Australian futures pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar traded at 58.85 US cents at 7am from 58.99 cents yesterday.

New Zealand’s S&P/NZX 50 index dropped 0.9% yesterday in a broad-based decline for the local bourse.

Australian inflation data today are expected to show consumers prices rose 4.8% in March from a year earlier, while Statistics New Zealand is due to release its household living-costs price index.

And New Zealand’s Reserve Bank governor Breman is due to participate in a panel discussion today, where she will talk about the economy and its general outlook, and the Waikato region. The RBNZ will review monetary policy on May 26, with bond traders pricing in a 15 basis point increase to the 2.25% official cash rate, indicating a better-than-even chance of a rate hike.

Reporting by Paul McBeth. Image from Jonathan Kemper on Unsplash.