Artificial intelligence stocks experienced a global downturn Monday following warnings from industry leaders about the need for a safety-focused slowdown in AI development. This decline coincided with a significant jump in oil prices, which also pressured financial markets.
The S&P 500 index fell 0.6%, while the Nasdaq composite, heavily weighted with technology stocks, dropped 0.8%. The Dow Jones Industrial Average saw a decrease of 147 points, or 0.3%, in early trading.
Despite overall market declines, more stocks within the S&P 500 saw gains than losses. Energy sector stocks rose with crude oil prices, and some companies that had previously fallen due to concerns about AI-driven competition saw partial recoveries, partially offsetting the weakness in the AI sector.
AI stocks have been under scrutiny due to concerns that their valuations had become overly inflated amid the technology's rapid ascent. These worries intensified over the weekend when Anthropic CEO Dario Amodei called for a deliberate global slowdown in AI development, citing safety risks, including the potential for AI to orchestrate a rapid takeover of the internet.
Nvidia, a key supplier of chips for AI model training, experienced a 3.4% decline, significantly impacting the market due to its substantial size. SpaceX shares dropped 1.7% after Elon Musk echoed Amodei's concerns. Softbank Group, a major investor in OpenAI, saw its Tokyo-listed shares fall 10.7% after OpenAI's Sam Altman also supported the idea of a development pause.
Altman indicated in an interview published Saturday that OpenAI might delay a Wall Street stock offering until next year, potentially postponing a significant influx of capital for Softbank and other early investors.
In South Korea, the Kospi index decreased by 3.3%, driven by losses in its leading stocks, Samsung Electronics and SK Hynix. Other beneficiaries of the AI boom, including companies in the power sector supplying data centers, also saw declines. GE Vernova fell 8%, and Constellation Energy Group dropped 5.4%.
On Sunday, former President Donald Trump downplayed the immediate need for government oversight of AI development, expressing concern about ceding technological advantage to China and suggesting that maintaining U.S. leadership would help manage AI risks.
Conversely, several software companies that had previously faced pressure from AI competition saw their stocks rebound. Intuit, maker of TurboTax and QuickBooks, rose 5.6%. Autodesk, a design software provider, climbed 4.4%, and Adobe gained 3%.
Energy sector stocks also advanced, with ExxonMobil rising 1.3%, as crude oil prices continued to climb. The price of Brent crude rose 4.3% to $109.12 per barrel. This increase is attributed to disruptions in oil flow stemming from the conflict in the Middle East, including an attack on a major Saudi oil pipeline that will be largely out of service for weeks. This disruption impacts Saudi Arabia's ability to reroute exports away from the Strait of Hormuz.
Brent crude prices have risen significantly since early July amid doubts about a potential de-escalation of tensions in the Persian Gulf. The average price for a gallon of regular gasoline in the U.S. has increased to nearly $4.32 from $4.08 a month ago, according to AAA.
The rise in oil prices and broader inflationary pressures are leading many on Wall Street to anticipate a potential interest rate hike by the Federal Reserve this week. Higher interest rates increase borrowing costs for consumers and businesses, potentially slowing the economy and impacting investment prices.
Concerns about rising government debt, particularly for the U.S., have also contributed to longer-term Treasury yields reaching multi-year highs. The yield on the 10-year Treasury rose to 4.99% from 4.96% on Friday.