OpenAI’s Miss Exposes AI’s Debt Load as Yields Climb

Dear readers,

One number from OpenAI was enough on Thursday to push the semiconductor index down 3.4 percent. Chip stocks are recovering on Friday, but the episode raised a bigger question: who pays for the AI buildout when Treasury yields sit at multi-year highs? The question gains weight ahead of next week’s start of earnings season with the big US banks, and TSMC’s full report on October 15.

OpenAI’s Miss Puts the Debt on Display

According to the Financial Times, OpenAI’s annualized revenue stood at just under $50 billion at the end of September. The market had expected $70 billion, and Bloomberg now cites that level as the target for year-end. Oracle lost more than 5 percent on Thursday, and Nvidia and AMD also fell sharply. All three are recovering on Friday, though Oracle remains about 52 percent below its level of twelve months ago.

What matters is how the buildout is paid for, and increasingly the answer is debt. Broadcom is arranging roughly $50 billion in financing around OpenAI, according to the Wall Street Journal and Reuters.

Credit default swaps on Broadcom hit a record 136 basis points, and Oracle’s rose to a record 261. SoftBank, which holds about 13 percent of OpenAI, is seeking up to $100 billion from Gulf investors, according to the Financial Times. Its shares are more than 30 percent below their June high.

The logic is simple. As long as OpenAI keeps growing, the financing stack holds. If growth falls short of targets, the pain lands first on the lenders and on suppliers with heavy borrowing. Investors betting on AI should now weigh balance-sheet strength as heavily as growth.

Yields Are the Real Opponent

The 10-year Treasury yield hit 5.364 percent on Wednesday, a 24-year high, and now sits around 5.25 percent. Pimco’s chief investment officer Dan Ivascyn considers a move above 6 percent possible in the short term. He warns that at 5.5 percent, stocks and credit markets would face noticeable declines. The Fed minutes point for the most part to another rate hike by year-end, and Governor Christopher Waller sees a need for more.

That makes next week’s US consumer price report a test. The prior reading was 3.4 percent. A surprise to the upside would stoke rate fears, and richly valued tech stocks are the most sensitive to them. The Nasdaq 100 is about 2 percent below its October 6 high.

TSMC: Record Sales Before the Full Numbers

TSMC has already put a number on its quarter. Third-quarter revenue rose to about NT$1.49 trillion, up roughly 50 percent from a year earlier and above the consensus of NT$1.46 trillion. The full results follow on October 15, and then margin and outlook will count. Management had guided to a gross margin of 65 to 67 percent for the quarter.

The demand picture is firm. Piper Sandler reports the most advanced manufacturing capacity sold out through the first half of 2028, and Stifel reiterated its “Buy” rating with a $515 price target.

AMD CEO Lisa Su is seeking additional capacity in Taiwan for 2027, and her Venice chip is made at TSMC on the 2-nanometer process. The stock trades just over 4 percent below its October 5 high and is up a good 60 percent year to date.

Should investors sell immediately? Or is it worth buying TSMC?

Sold-out capacity underpins TSMC’s pricing power. The risk lies less in the business itself than in a valuation discount if yields keep rising.

Apple: AI’s Memory Appetite Reaches the iPhone

If TSMC shows the upside of the chip boom, Apple shows the cost. Reports say the company is cutting its October component orders for the iPhone 18 Pro and Pro Max by 15 to 20 percent from plan. The reason is pricier memory chips, which AI data centers are making scarce.

Both models went up $100 in price, with the Pro starting at $1,199. Apple has not confirmed the reports, and there is evidence pointing the other way: 1.3 million devices were reportedly sold in China in the first week, 15 percent more than for the predecessor.

Apple shares are down about 2.5 percent in Friday trading. Samsung expects production cuts of up to 30 percent in the fourth quarter, according to reports. Market researcher IDC forecasts global smartphone shipments to fall 16.7 percent in 2026 while average prices rise 27.6 percent.

Micron holders profit from exactly this squeeze, with the stock up a good 270 percent year to date. For Apple it becomes a margin problem. Higher memory costs can only be passed on through prices, and higher prices dampen demand.

Delta: Oil Eats the Profits

Delta Air Lines shows how expensive oil flows through to the income statement. The airline sharply cut its 2026 profit guidance. Adjusted earnings per share are now expected at $5.10 to $5.60, down from the earlier range of $6.50 to $7.50. The reason is roughly $6 billion in higher fuel costs.

Third-quarter adjusted earnings per share came in at $1.72, just below consensus, and at $1.15 under US GAAP. The stock is down about 3 percent in Friday trading.

For the fourth quarter, Delta expects revenue growth of about 20 percent but is budgeting for fuel at $4.25 per gallon. Brent remains above $100, and Germany is releasing up to 15 million barrels from its reserves under a G7 agreement. That probably eases price pressure only briefly.

The Takeaway

The coming week turns on three dates: the bank earnings, the US inflation report and TSMC on October 15. If inflation does not come in hotter and TSMC delivers the expected outlook, the recovery in chip stocks can firm up. A fresh jump in yields toward 5.5 percent would overpower even strong results. The debt question hanging over the AI industry remains the risk that prices have been slow to reflect.

Best regards,
The StocksToday.com Editorial