AI spending has been a key engine for the market, and some investors now worry that it could stall out, one expert says
Reports that OpenAI may delay its initial public offering to next year are contributing to some weakness in the artificial-intelligence trade.
Optical stocks have emerged as a bountiful play on the artificial-intelligence trade, but Friday's selloff is putting a damper on that momentum.
Shares of Lumentum $(LITE)$ and Coherent $(COHR)$ were down about 5% on Friday afternoon, though both stocks have climbed 100% so far this year on enthusiasm for optical interconnects that are touted as faster, more efficient solutions in AI data centers than traditional copper.
Other optical and networking-related stocks such as Macom Technology Solutions $(MTSI)$, Broadcom $(AVGO)$, Corning $(GLW)$ and Credo Technology $(CRDO)$ were also in the red Friday afternoon.
Funds tracking the theme were also feeling the pain. The Corgi Lithography & Semiconductor Photonics EUV exchange-traded fund and Tuttle Capital Pure Play Photonics FOTO ETF were down by about 4% in Friday's intraday action.
The weakness is partly being driven by the continued downturn plaguing Asian tech stocks. South Korea's Kospi index KR:180721 fell nearly 6% Friday, with major names like memory chip makers SK Hynix (KR:000660) and Samsung Electronics (KR:005930) sporting big losses.
Japan-listed shares of SoftBank (JP:9984) plunged more than 12% after the New York Times reported Thursday afternoon that OpenAI, which is backed by the banking giant, might delay its planned initial public offering to next year.
"The concern is not just about SoftBank's potential exit timeline; it is also about whether AI monetization is progressing quickly enough to support the valuations and capital commitments already embedded across the ecosystem," Patrick Munnelly, a strategist at Tickmill Group, told clients in a note.
Matthew Tuttle, whose firm manages the FOTO ETF, said that the reported OpenAI delay "doesn't help," but that other factors are also at play. Investors have been selling momentum stocks since shortly after SpaceX's $(SPCX)$ IPO earlier this month, he said, which has drawn a lot of attention from retail and institutional investors alike.
"Photonics is probably the next bottleneck after memory, but these stocks have run a lot and can't go up in a straight line," Tuttle told MarketWatch in emailed comments, noting that recent inflation data is hot.
Although Micron Technology $(MU)$ was able to deliver a confident signal about the health of the overall AI trade on Wednesday, investors have focused on the impact of high memory-chip prices, and a potentially prolonged supply-demand imbalance, on other parts of the sector.
Apple $(AAPL)$ raised the prices of its MacBooks and iPads on Thursday, shortly after CEO Tim Cook warned that increases would be "unavoidable" due to the high cost of components like memory. Microsoft $(MSFT)$ said Thursday that it would hike the cost of its Xbox gaming consoles as well, noting that it expects storage and memory prices to double by the fall of 2027.
Shares of Sandisk $(SNDK)$ fell 7% in Friday's session, while Seagate Technology's stock $(STX)$ dropped 8%, and Western Digital's $(WDC)$ fell 12%. Despite the declines, all three companies are still up significantly so far this year.
Hendi Susanto, a portfolio manager at Gabelli Funds, said the recent pullback is being driven by a mix of rotation into other sectors, profit taking in recent winners and concerns over high valuations. However, Susanto told MarketWatch in emailed comments that his firm remains upbeat about companies making the "foundational building blocks of AI infrastructure."
Meanwhile, The Information reported Thursday that OpenAI was asked by the Trump administration to stagger the roll out of its upcoming GPT-5.6 model, starting with government-approved partners, due to security concerns.
That comes weeks after the U.S. government placed export restrictions on Anthropic's powerful Mythos AI model over worries that it could be easily hacked.
Don't miss: U.S. restrictions on new Anthropic models could trigger a global AI arms race
Wedbush analyst Matt Bryson said the uncertainty over the rollout of frontier AI models could be driving some of the selloff on Friday, as investors reevaluate the billions of dollars being spent on development.
The delayed release of AI models could impact demand for inference, or the process of running AI models, which would have "significant negative ramifications across tech," he told MarketWatch.
Spending on AI has been an "engine" behind the market, he said, and if it's "going to stall, there's a broader problem here."
-William Gavin -Britney Nguyen
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(END) Dow Jones Newswires
June 26, 2026 13:53 ET (17:53 GMT)
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