AI-linked stocks plunged worldwide on Monday after leaders of the biggest artificial intelligence companies warned of risks from rapid development, posing the starkest threat yet to the billions of dollars being poured into an industry that has driven world markets to record highs.
The sell-off rippled through the industry, where companies are increasingly relying on debt and circular financing to fund ambitious AI spending plans even as global borrowing costs, reflected in multi-year-high bond yields, continue to rise.
Anthropic Chief Executive Officer Dario Amodei, in a lengthy essay shared on X on Saturday, called on AI companies to slow the rate at which they advance model capabilities amid mounting fears of the misuse of artificial intelligence. Both Elon Musk, who runs xAI, and Sam Altman, Chief Executive Officer of OpenAI, said they agreed with Amodei.
Altman also said the company would not proceed with an IPO this year, citing safety concerns.
Wall Street’s elite technology index, the Nasdaq 100, slid 1.2 per cent to a six-week low in early trading as chip stocks, which have led the AI sugar rush, fell the most.
“If this does lead to sort of a slowdown and a rethink of AI spending, that will have ramifications for the economy and some important sectors of the stock market, because essentially, we’ve been running hot based on AI spending,” said Steve Sosnick, chief market analyst at Interactive Brokers.
The Philadelphia chip index dropped 5.1 per cent, with Nvidia down 3.6 per cent, Advanced Micro Devices off 5.6 per cent and Micron falling 6 per cent, while Musk’s SpaceX shed 1.6 per cent.
Semiconductor equipment makers Lam Research and Applied Materials tumbled 6 per cent each, while technology utilities Bloom Energy lost 6.8 per cent and GE Vernova declined 7.4 per cent.
Europe’s technology sector fell 2.2 per cent, dragged down by ASML’s 5.9 per cent decline and steep losses in Infineon and Siemens Energy, while in Asia, SoftBank plunged as much as 13.2 per cent and chipmakers TSMC and SK Hynix also retreated.
“UNACCEPTABLE” RISKS
Alarm about the potential harm from AI spiked earlier this month when Anthropic researcher Jacob Coxon resigned, stating that the “people building AI earnestly believe that it could kill us all by the end of the decade.”
A few days later, the San Francisco-based AI laboratory released a threat intelligence report detailing how its Claude AI models were used for activities ranging from weapons development and cyber operations to surveillance and fraud.
Over the weekend, Amodei wrote that in six to 12 months, AI agents “could be capable of taking over the entire internet potentially causing hundreds of billions of dollars in damage.” Separately, OpenAI’s Altman said in an interview that the risks of human extinction posed by AI were “unacceptable”.
And while several US lawmakers have raised concerns about AI’s rapid progress and called for new rules, US President Donald Trump said that a “sick conspiracy” against AI and data centres exists, appearing to play down concerns expressed by industry leaders.
AI-related trades have powered much of the gains in global equities since OpenAI released ChatGPT in 2022, but more recently, cyberattacks by rogue AI agents and public discontent with data centre construction have raised opposition to the development of the industry.
The US and Chinese governments are expected to hold AI safety talks as part of bilateral discussions taking place this month, Reuters reported. But China’s state-backed Global Times blasted the Anthropic essay in an editorial, calling it a “Cold War playbook” intended to curb the country’s technological development.
A growing concern for OpenAI and Anthropic is the rising competition from more affordable Chinese models such as Moonshot AI’s Kimi K3, Alibaba’s Qwen and DeepSeek’s offerings, which could put pressure on the pricing of larger, more costly models.
NOT ALL BELIEVE THE WARNINGS
Some investors dismissed the warnings from Anthropic and OpenAI.
Michael Burry, whose prescient bets against the US housing market before the 2008 financial crisis were chronicled in the movie “The Big Short”, said in a message on X that the warnings were “hype and puffery” and “cover for real uncontrollable slowing growth”.
Others have argued that record capital-spending commitments suggest AI development is unlikely to slow. Morgan Stanley Chief Executive Officer Ted Pick forecast earlier this year that AI spending would surpass $1.3 trillion by 2027.
“The key question is whether this is the first sign that the extraordinary AI investment cycle might eventually moderate. 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,” Deutsche Bank said in a note.
Meanwhile, Amodei’s Anthropic has pushed ahead with its public debut, expected next month, as sources told Reuters that the company is in talks to bring in Nvidia as an anchor investor.
Japanese chipmaker Kioxia Holdings is also considering raising at least $10 billion by listing American depositary receipts, a report said.
