Why Tower Semiconductor Took a Dive Today

Shares of Tower Semiconductor (NASDAQ: TSEM) fell 7.4% on Friday.

Tower is an Israeli semiconductor manufacturing company that produces specialty semiconductor nodes. Those aren't the most leading-edge, cutting-edge chips produced by the likes of Taiwan Semiconductor Manufacturing (NYSE: TSM). However, Tower has become a massive AI winner, with the stock up a whopping 465% over the past year, due to its specialized silicon photonics technology. AI data centers are switching from copper to silicon photonics networking right now, so Tower's growth and future expectations have exploded.

However, investors are in a profit-taking mood today after a rumor emerged yesterday that OpenAI may delay its IPO.

OpenAI reportedly delays IPO

Yesterday, The New York Times reported that artificial intelligence pioneer OpenAI may delay its initial public offering, originally planned for this year, into 2027. According to the article, OpenAI's hesitation stems from the public debut of Space Exploration Technologies (NASDAQ: SPCX) and its subsequent price action.

However, that seems like an excuse. While SpaceX spiked on its first day of trading and has subsequently retreated, its stock price is still solidly above its IPO price of $135 per share. That is by no means abnormal for a new issuance or a sign of a "failed" IPO.

What's concerning is that OpenAI's financials, user growth, and other key performance indicators may not be as strong as Sam Altman and OpenAI's management would like. This year, rival Anthropic has seemingly become the leader in many key categories for large language models and has reported explosive growth. Earlier this month, the Wall Street Journal reported that OpenAI was contemplating "dramatic" price cuts to boost its user base amid its war with Anthropic.

The upshot is that, if OpenAI is not growing as quickly as some would like, that could curtail its infrastructure investment going forward. Given how far AI-related semiconductor stocks have run this year, it's no surprise that even the extrapolation of a rumor could lead to a sell-off.

Image source: Getty Images.

We've seen this before

While OpenAI's story is notable, it doesn't necessarily mean long-term oriented. Foolish investors shouldn't panic. We've seen "scares" before in the AI build-out, from the debut of the low-cost Chinese model DeepSeek to large debt raises on behalf of hyperscalers, and more.

Even if OpenAI is struggling today, it doesn't mean it will quit competing. After all, there was a time when it was ahead of Anthropic. So, things could flip again. And if the broader AI build-out is really as large as many commentators think, there will still be investment in infrastructure from other players.

Investors should, however, stay on top of the news and note shifts in the industry, such as the recent shifts from training to inference to agentic, and should probably have exposure to a basket of likely beneficiaries. As of now, Tower still seems like one of the winners.

Billy Duberstein and/or his clients have positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.