U.S. equity markets shook off warnings Monday from artificial intelligence CEOs who had called for a slowdown in the pace of developing the revolutionary technology.
Early on in the trading session, the Nasdaq 100 index, which tracks the 100 largest nonfinancial companies traded on the Nasdaq exchange, fell as much as 1.8%. The broader Nasdaq Composite index fell as much as 1.3% and the S&P 500 fell almost 1%.
But a rally in software and cybersecurity stocks brought major indexes off their lows. By the end of the trading session, the Nasdaq Composite closed lower by only 0.56%. The S&P 500 fell 0.48%.
President Donald Trump downplayed the warnings in more than a half-dozen posts on social media throughout the day, signaling to investors that the odds of any serious action on those issues at the federal level were slim.
“AI taking over the World, destroying Humanity, and all other things bad, is a HOAX,” Trump wrote, comparing warnings on AI to the investigations into his ties to Russia and the two impeachments of his first term in office. AI “will not be stopped” during his presidency, he wrote.
There were several significant declines on the day. Shares of Nvidia, the world’s most valuable public company, fell 3.36%. Chipmaker Arm Holdings fell 9.7%, while peer ASML fell 7.2%. AMD and Intel slid more around 5%. Applied Materials, a key supplier to chip companies, also sank 7%. Micron Technologies tumbled 5.2%. CoreWeave, a key supplier of data centers and cloud computing to AI firms, fell 6.7%.
The Dow Jones Industrial Average closed down just 152 points, but Dow component Caterpillar, which is involved in the buildout of AI data centers, tumbled 4.2%. The Philadelphia Semiconductor Index plunged 5.8%, its worst day since July.
OpenAI CEO Sam Altman told Fortune magazine Saturday that his company would not be going public this year. “Given everything happening with safety, right now would be an ill-advised moment to go public,” he said.
OpenAI and Anthropic’s eventual public offerings are expected to be among the largest of all time.
“For markets, the key question is whether this is the first sign that the extraordinary AI investment cycle might eventually moderate,” said Jim Reid, Deutsche Bank global head of macro research.
“For now, that seems unlikely. The competitive race between companies and countries remains intense, and it’s difficult to imagine firms voluntarily stepping back while rivals continue to push ahead.”
Overnight, worries about slowing the AI industry hit South Korea’s benchmark Kospi index, which sharply fell more than 3%. That fall was primarily due to selling in AI memory firms. Samsung Electronics sold off by 5% and SK Hynix plunged more than 7.3%.
In Tokyo, shares of OpenAI investor SoftBank Group fell 10.7%.
The dramatic market moves were set in motion on Saturday, when Anthropic CEO Dario Amodei wrote in a public post that AI companies “must slow the pace at which we improve the capabilities of AI models.”
“AI brings risks, and because it is such a powerful technology, these risks are serious,” he wrote, and include “losing control of AI systems, misuse of AI for cyberattacks and bioterrorism, and serious economic disruption.”
Shortly after Amodei’s post, Altman wrote, “I agree with Dario.” Tech billionaire Elon Musk wrote, “Dario is right.”
Shares of Musk’s SpaceX, which owns artificial intelligence developer xAI, fell 2%.
Altman later added in another post: “When we talk about ‘pacing’, we do not mean ‘stopping’.” He said that “progress has been rapid and will continue to be.”
Amodei expanded on his thoughts Sunday. Speaking to CBS’ “Sunday Morning,” he warned that there are “real dangers.”
“I don’t think I fully just appreciated what it would actually be like when the progress was as fast as it was,” he said. “It doesn’t mean we need to panic today. It doesn’t mean we need to shut it all down. But I would say it’s a warning sign.”
The Chinese Foreign Ministry overnight dismissed calls for a slowdown from the U.S. A spokesperson said “fearmongering” would only “disrupt the process of global AI governance and serve no one’s interests.”
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President Donald Trump sounded a similar tone over the weekend. “I think you have a lot of very negative forces that are bringing it up that shouldn’t be bringing it up and they’re bringing up things that won’t happen,” he said Sunday, referring to putting guardrails on the industry.
Still, selling in AI companies continued to spread through the European trading session, where Germany’s DAX index closed down 0.5% and France’s CAC 40 index dropped 0.8%. The biggest decliners across European markets were AI-related.
While AI worries were initially the primary driver of selling Monday, stocks are also dealing with the prospect of a Fed rate hike Wednesday.
U.S. core inflation, which does not count food or energy costs, on Friday rose more than expected, which many viewed as the signal for the Federal Reserve to hike rates. Market odds for a hike currently sit at about 85%.
At the same time, bond yields have surged this year and, on Monday, the U.S. 30-year Treasury bond yield reached 5.38%, its highest level since 2007.
The 10-year Treasury yield, which heavily influences consumer borrowing rates, rose to as high as 5.014%, its highest level since 2023 and very near its highest level since late 2007.
However, just like stocks, yields sharply reversed late in the morning and by midday were back to their lowest levels since Friday.
The rise in bond yields comes as oil, gas and diesel prices remain sharply elevated. It is also due to what many view as a crisis of credibility at the Fed and unusual interventions in markets from the Treasury Department.
“Oil and AI are back in focus,” HSBC’s chief multi-asset strategist Max Kettner said Monday in a note to the bank’s clients. However, he said, “calls for a slower AI build-out and resulting fears for the tech sector are overblown in our view.”
Tech stocks have become highly sensitive to interest rates as those firms tap the public debt markets to raise hundreds of billions of dollars to expand AI data centers around the world. Even small rises in interest rates can cause billions of dollars in extra costs.
