Wall Street’s AI train is still steaming ahead, even after the technology’s leaders called for a slowdown.
Investors listened, nodded solemnly—and then proceeded to buy more AI stocks.
Shares of Microsoft, Alphabet and Meta Platforms—three of the biggest so-called AI-hyperscalers—all advanced 2% or more Monday. The S&P 500 fell 0.5%, while the tech-heavy Nasdaq composite slipped 0.6%. The Dow Jones Industrial Average ended Monday down 0.3%, or 152 points. The PHLX Semiconductor Index dropped 5.9%, its worst day since July, while shares of cybersecurity companies soared. Software companies, whose shares were buffeted this year by concerns that new AI tools would render them obsolete, were among the best performers in the S&P 500. Corning, Teradyne, and Coherent were the S&P 500’s worst performers, all down at least 12%. The PHLX index remains up 84% over the past year.
They and others benefited from a rotation out of the chip makers supplying AI hardware and toward the customers whose data centers need semiconductors. In favoring hyperscalers over chip stocks, the market appeared to conclude that Microsoft and its peers will still be among the world’s most-profitable companies even if AI investments were to lose speed. As suppliers, chip makers such as Micron Technology and Intel rely on new orders to keep their growth stories going. A slowdown isn’t a foregone conclusion. The AI build-out has emerged as one of the U.S. economy’s steadfast sources of growth, a tentpole for the global capital markets and the primary battleground in America’s ongoing technology arms race with China. Much is at stake in keeping it going, even if it all pales in comparison to humanity’s potential extinction. Trump weighed in again later in the afternoon, calling Nvidia Chief Executive Jensen Huang while he was on stage at a Los Angeles tech conference. “The robots will not be taking over. “It’s all a hoax. The major U.S. stock indexes posted modest declines Monday. However alarming the warnings might be, few seem to be taking them as a reason to abandon the AI trade that is responsible for much of the U.S. stock market’s multiyear rally. The technology race with China is part of the reason. “What really happened? “With China in the race, though, we don’t expect any major slowdown. And as for any retracement in AI stocks, that is simply a buying opportunity. In the first half of the year, investors were looking for companies that could capitalize on bottlenecks in the supply chain by selling in-demand products at high prices. “Some of these stocks have pulled back. Now the question is, will the constraint trade continue to work in the back half of the year? Or will we see a resurgence of some of the more traditional compute trades? The moves underscore the challenge for investors and analysts in identifying how the latest advancements, setbacks and regulatory developments in AI will affect swaths of markets and the economy. By some measures, individual stocks in the U.S. have been less correlated than ever this year, which many chalk up to the race to identify AI winners and losers across industries. Shares of AI-related hardware suppliers took a beating. Still, an ugly day for chip stocks likely has more to do with investors’ taking some chips off the table following huge profits than a fundamental reset in their outlook for continued massive profits driven by chip shortages. “Some of these semiconductor names have tripled this year. To the extent that you’re looking for a reason to get off the train for a moment or at least right-size your position, you got a good one over the weekend,” Hogan added.
“There is a SICK conspiracy going on against AI and Data Centers, and the only one that is happy about it is China,” Trump wrote in a Truth Social post. The AI will not be taking over,” Trump said on speakerphone. “That’s right, we’re not going to let that happen, sir,” Huang responded, according to a video of the exchange shared with The Wall Street Journal by investor Ben Pouladian. Surely something big enough to spook Dario, Sam and Elon into rare agreement,” said Giuseppe Sette, co-founder of Reflexivity, an AI investment analytics firm. Jim Schneider, a Goldman Sachs tech analyst, said that the AI trade has shifted dramatically. “The easy trade in the half of the year was chasing elements of shortage, whether that was DRAM or memory stocks or optical elements,” Schneider said last week at an investor conference.
By midmorning on Monday, President Trump had signaled that he was unmoved by the AI leaders’ calls for restraint.
Meanwhile, rising energy costs are amplifying market jitters. The closure of a Saudi pipeline Friday blocked a second major source of crude on top of the already-disrupted Strait of Hormuz. Write to Jack Pitcher at [email protected] , Shradha Dinesh at [email protected] and Robbie Whelan at [email protected]
Brent crude settled at about $106 a barrel, up 1%, as widening instability in the Middle East threatens oil supply. And diesel prices are hitting new records, with the average nationwide price a gallon trending above $6. Climbing energy prices come against the backdrop of a wider selloff of U.S. government bonds, which pushed the 10-year Treasury yield above 5% on Monday, the second time since 2007. Investors are anticipating an interest-rate increase, with futures placing odds above 90%.
Rising fuel costs are keeping markets squarely focused on inflation and how the Fed might respond on Wednesday.
CrowdStrike was the S&P 500’s top performer, adding 14%. One thing most agree on: The AI investment boom isn’t going to end soon. The assumption has made it easier for many to take the industry’s weekend warnings as a positive. Riley Wealth. Anthropic’s Amodei suggested a slowdown as the AI arms-race takes shape around recursive self-improvement, the idea that AI could endlessly optimize itself. Altman and Musk, bitter and often boisterous rivals, soon agreed. AI researchers are particularly alarmed at the threat the tech poses to cybersecurity, and the latest round of warnings prompted a big day for shares of cybersecurity firms Monday. Palo Alto Networks, Fortinet, and ServiceNow also posted outsize gains.
“I think it’s an inflection point that likely gets us to a better place for safety at the end of the day while causing volatility in the interim,” said Art Hogan, chief market strategist at B. “And I certainly don’t think the frontier developers are willing to say ‘the hundreds of billions we’ve invested in this was bad and we’re walking away.’” This isn’t the first time AI doomerism has escaped Silicon Valley. But a recent cascade of events raised the volume: OpenAI’s AI agents separately hacked into platforms Hugging Face and RubyGems, and a now-departed Anthropic researcher and several current employees said AI systems could end humanity as early as within the decade.
