Nvidia's stock dropped 3% after OpenAI's annualized revenue was reported at $50 billion, later corrected to a potential $70 billion. The confusion caused a market overreaction that may present buying opportunities.
TL;DR
- Nvidia's stock dropped $170 billion after OpenAI's revenue figures were initially reported lower than expected.
- The market may have overreacted, as OpenAI's revenue could reach $70 billion by year-end.
- Nvidia's strong fundamentals and Broadcom's direct link to OpenAI make both stocks attractive despite the selloff.
What happened
On October 8, the Financial Times reported OpenAI's annualized revenue at $50 billion, causing a selloff in AI stocks. Nvidia dropped 3%, losing $170 billion in value, while Broadcom fell over 4%.
Later, Bloomberg reported OpenAI expects to reach or exceed $70 billion in annualized revenue by year-end. The discrepancy arose from whether revenue from cloud partners was included.
Nvidia's strong fundamentals include expected revenue growth of 70% in fiscal 2028 and a record $150 billion buyback. Broadcom is building custom AI chips for OpenAI under a 10-gigawatt deal.
Why it matters
The market may have overreacted to the initial OpenAI revenue figures, creating potential buying opportunities for Nvidia and Broadcom stocks.
Nvidia's valuation is attractive, trading at a considerable discount despite being central to the AI boom. Analysts expect earnings to grow 95% this fiscal year and 71% the next.
Broadcom's direct link to OpenAI through a custom AI chip deal makes it an attractive investment, despite the initial market reaction.
Key facts
- OpenAI's annualized revenue was initially reported at $50 billion by the Financial Times, later corrected to a potential $70 billion by Bloomberg.
- Nvidia's stock dropped 3%, erasing $170 billion in value, while Broadcom fell over 4%.
- Nvidia expects to double the number of chips it sells in 2027 and has guided to about 70% revenue growth in fiscal 2028.
- Nvidia's forward non-GAAP P/E ratio is 25.50x, about 40% below its 5-year average of 42.15x.
- Nvidia held approximately $23.2 billion in net cash as of July 26, 2026.
- Broadcom is building custom AI chips for OpenAI under a 10-gigawatt deal, with talks of $30 billion in financing for the next phase.
- Analysts expect Nvidia's earnings to grow 95% this fiscal year and 71% the next.
Context
The AI industry has seen significant growth and volatility, with companies like Nvidia and Broadcom playing crucial roles in AI infrastructure and chip development.
OpenAI's revenue figures have been a topic of interest, with the company's growth and partnerships impacting the broader AI market.
The market's reaction to OpenAI's revenue figures highlights the sensitivity of AI stocks to news and the potential for overreactions.
