The same day OpenAI announced the largest private funding round in history, public markets went the other direction.
The Dow dropped over 600 points (roughly 1.2%). The S&P 500 fell 0.7%. The Nasdaq slid approximately 1%. Both the S&P 500 and Nasdaq were tracking toward their worst month since March 2025. Nvidia fell another 2.5% after dropping 5.5% the prior session, despite posting an earnings beat. UBS cut its US equities allocation to “neutral.”
Two forces converged. Producer Price Index data came in hot: headline PPI at 0.5% versus the 0.3% economists expected, with core PPI at 0.8% against the same 0.3% consensus. That’s the kind of miss that makes rate cut expectations evaporate. On top of the inflation surprise, the AI trade that carried markets through much of 2025 showed visible cracks. Nvidia’s post-earnings sell-off suggested investors are no longer willing to pay a premium for AI infrastructure spending on faith alone.
The paradox is hard to miss. Private capital poured $110 billion into OpenAI on the same day public investors punished AI-adjacent stocks. Private markets are betting AI infrastructure spending will generate massive returns. Public markets aren’t so sure. The sector dispersion hit 99th percentile levels, meaning the gap between winning and losing sectors was wider than virtually any period in recent market history.
Whether this is a healthy correction or the beginning of a repricing depends on whether the compute buildout produces revenue to match the investment.