Asian stocks and US equity-index futures retreated after major artificial intelligence companies called for a slowdown in technology development, raising concerns for a sector that has powered this year's rally. MSCI’s Asia Pacific equities index dropped 0.5%, with the Kospi Index falling 2.1%. Chipmakers SK Hynix Inc. and Samsung Electronics Co. fell, while SoftBank Group Corp. slumped as much as 13% after OpenAI's CEO Sam Altman stated the company would not go public this year. Futures on the tech-heavy Nasdaq 100 Index declined 1.1% and contracts for the S&P 500 Index fell 0.4%.
Meanwhile, Brent crude rose 2.7% to $107.51 a barrel after Saudi Arabia shut a key oil pipeline following drone attacks and a planned meeting between Iran and Gulf states was postponed. The dollar strengthened and Treasuries held losses from the previous week's selloff, pushing the benchmark 10-year yield closer to 5%. This followed hotter-than-expected US inflation data, strengthening the case for higher interest rates. Swap traders now see a nearly 90% chance the Federal Reserve will raise its key rate on Wednesday.
Investors are re-evaluating the AI trade to gauge whether recent warnings from AI leaders could curb corporate spending and challenge earnings expectations across the supply chain. This shift occurs at the start of a pivotal week for markets, with a Federal Reserve meeting imminent, as rising oil prices fuel inflation concerns and keep borrowing costs elevated. Tim Waterer, chief market analyst for KCM Trade, commented that warnings about an AI slowdown combined with higher oil prices are a difficult mix for risk assets, and the 10-year Treasury yield nearing 5% is another nervous sign for stocks.
Anthropic PBC CEO Dario Amodei stated that his company would introduce additional safeguards and urged the broader industry to slow the development of its most advanced models. OpenAI’s Altman backed this proposal, and xAI’s Elon Musk agreed. This debate adds to scrutiny regarding the billions being invested in AI and whether earnings can justify soaring infrastructure costs. High-valuation shares remain vulnerable to signs of weaker returns or slower spending, though some investors anticipate any pullback to be short-lived due to continued strong demand for computing infrastructure. Frederic Neumann, chief Asia economist at HSBC, noted that the spike in oil prices and central bank actions from the Fed and BoJ are significant enough for investors to take a breather.
