Tech stocks were sold off on Friday, continuing a weak week that could see more of a crash than meets the eye. The apparent trigger for the decline was Thursday’s New York Times report that OpenAI is considering delaying its initial public offering, citing the weak performance of SpaceX shares after its own IPO and recent volatility in tech stocks. But analysts say China’s artificial intelligence model could give OpenAI and its main competitor Anthropic an advantage, potentially posing a bigger problem for the tech industry. The launch of GLM5.2 by Hong Kong-listed Z.ai (formerly known as Zhipu AI) is “nearly comparable” to Anthropic at a fraction of the price, according to Jefferies strategists. These cost advantages could potentially steal corporate customer share from the U.S. Frontier model ahead of its IPO. “This new model is on par with Anthropic as a competitor in the corporate market, and is only a quarter of Anthropic’s cost per token,” Christopher Wood of Jefferies said in a note, citing industry sources. He described last week to clients as “another DeepSeek moment.” Morgan Stanley traders said Thursday that Z.ai’s new model has “very good coding capabilities.” “Companies and hyperscalers cutting prices to cheaper models appears to be a recalibration of willingness to pay for AI rather than a deterioration in AI demand,” the traders wrote. The price of high-end AI, measured in units called tokens, has sparked interest from companies, with several companies cutting spending on AI and depleting their AI budgets in recent months. This has led to concerns that a price war could ensue between OpenAI and Anthropic, causing the company’s valuation to plummet before it goes public. But cheaper open source AI models that are roughly equivalent to Frontier models could pose an even bigger threat to these expected IPOs and the broader technology sector that will come with them. In a June 18 memo to clients, Deutsche Bank’s Jim Reed wrote that Anthropic’s cutting-edge AI model, Claude Fable 5, “does the same job for the vast majority (perhaps 90%) of the day-to-day tasks[China’s DeepSeek’s V4-Pro]does for almost 1.5% of the cost.” Z.ai’s new model will likely boast privacy protections comparable to the Frontier model, Jefferies analysts said in a note Thursday. This could change investments in AI construction as enterprises remove AI workloads from cloud service providers and move them back to their own servers. “The mix of demand is clearly shifting toward lower-priced models,” Morgan Stanley traders said Thursday. The threat of cheap international AI models and OpenAI reportedly reconsidering its IPO plans are raising concerns that the astronomical trajectory projections for infrastructure spending underpinning related stocks are a little too optimistic. Micron shares fell 7% in early trading, while AMD and Intel each fell more than 4%. Oracle has fallen as well, declining just 19% over the past five days.
