Key facts
- Fears over AI's existential risks are pressuring stocks amid other market headwinds.
- Calls to slow AI development came from Anthropic CEO Dario Amodei and OpenAI CEO Sam Altman.
- Chip stocks, including SK Hynix and Samsung, experienced significant declines.
- Oil prices surged due to Middle East conflict and a Saudi pipeline shutdown.
- Bond yields have risen, with the 10-year US Treasury yield nearing 5%.
- Markets are pricing in a 90% chance of a 25 basis point Fed rate hike this week.
Fears surrounding the existential risks of artificial intelligence are compounding existing market pressures, contributing to a significant downturn in stocks, particularly in the technology sector. The timing of these AI-related warnings from prominent industry leaders comes as investors are already contending with surging oil prices, rising bond yields, and the strong likelihood of a Federal Reserve interest rate hike.
Concerns were amplified after Anthropic researcher Jacob Coxon announced his resignation, warning of the potential for AI to pose existential threats. This sentiment was echoed by Anthropic CEO Dario Amodei, who called for a slowdown in AI development, a view shared by OpenAI CEO Sam Altman. Microsoft has also taken steps to address AI safety by posting a provisional code of conduct.
The market's reaction was swift, with chip stocks bearing the brunt of the selling. SK Hynix and Samsung saw significant drops in Asian trading, and this weakness continued into US hours. The S&P 500 and Nasdaq 100 opened lower on Monday.
Beyond AI anxieties, markets are facing a trifecta of headwinds. Oil prices have spiked again, with Brent crude topping $109 a barrel and WTI reaching $104, fueled by Middle East conflict and a Saudi pipeline shutdown, raising inflation concerns. The bond market is experiencing a sell-off, pushing the 10-year US Treasury yield close to the 5% mark, partly due to ongoing concerns about the US fiscal situation. Traders are also pricing in a high probability of a 25 basis point rate hike from the Federal Reserve at its upcoming meeting.
Economists like David Rosenberg have noted signs of weakness in the broader market, pointing to declining market breadth and the S&P 500's recent losses. Analysts at Jefferies highlighted that the tech sector is already heavily impacted, with the iShares Semiconductor ETF down significantly from its recent high. Bank of America slightly raised its year-end S&P 500 target but still indicated potential downside from current levels.