Global AI-related stocks experienced a downturn after prominent figures in the artificial intelligence industry, including Dario Amodei, CEO of Anthropic PBC, and Sam Altman, CEO of OpenAI, voiced concerns about the rapid pace of AI development and advocated for a slowdown for safety reasons. This unexpected caution from industry leaders, supported by xAI's Elon Musk, rattled market confidence in the sector that has driven much of this year's equity rally.
SoftBank Group Corp. saw its shares slide by more than 13% in Tokyo, marking its largest decline in nearly three months, as market jitters intensified around the Japanese tech investor, a significant backer of OpenAI. Other chipmakers and AI-linked companies also faced significant sell-offs; South Korea's Kospi Index, often seen as an AI investment barometer, dropped 2.1%, with SK Hynix Inc. and Samsung Electronics Co. falling, and Kioxia shedding over 7%. The tech-heavy Nasdaq 100 Index futures declined 1.1%, and S&P 500 Index futures fell 0.4%.
This market reaction was compounded by other macroeconomic pressures, including a further increase in oil prices following the closure of a key Saudi East-West pipeline and stronger-than-expected US inflation data. These factors heightened expectations for the Federal Reserve to raise interest rates, with swap traders now anticipating a nearly 90% chance of a rate hike this week and assuming 50 basis points of cumulative tightening by year-end. The 10-year Treasury yield also edged closer to 5%, further signaling a challenging environment for risk assets.
Despite the immediate market slump, some analysts, like Gary Tan of Allspring Global Investments, believe any pullback will be short-lived, arguing that the long-term AI trade remains intact. They suggest that a slower pace of development might even be beneficial, allowing companies more time to monetize existing infrastructure and shift from spending on building to making returns. Charu Chanana, chief investment strategist at Saxo Markets, noted that demand for computing power and AI adoption won't disappear and that responsible development could make the AI opportunity more durable.
