U.S. stock indexes experienced declines on Monday, pressured by warnings from leading artificial intelligence firms regarding a need to slow development. Additionally, rising oil prices and elevated bond yields put downward pressure on equities. The Nasdaq-100, Dow Jones Industrial Average, and S&P 500 all saw losses, although the Nasdaq managed to pare back earlier losses. The 10-year Treasury yield also briefly surpassed the 5% mark, marking the first time since 2023.
Major Index Performance
The three major indices recorded losses on Monday. The S&P 500 dropped 0.48%, the Dow Jones Industrial Average slid 0.29%, and the Nasdaq-100 declined 0.56%. While the market dipped during early trading, gains in large technology companies helped offset sell-offs observed in the semiconductor sector.
AI Safety Concerns Drive Tech Sell-Off
Technology stocks faced significant pressure after Dario Amodei, CEO of Anthropic, released a 3,800-word essay over the weekend. Amodei argued that the industry should temper the pace of advancing AI models to better address critical safety concerns. Sam Altman, CEO of OpenAI, echoed this sentiment in a post on X, placing the two major AI labs at odds with the expectation of rapid growth anticipated by Wall Street. These concerns also prompted OpenAI to postpone its initial public offering (IPO) until 2027, as Altman informed Fortune.
The market’s attention also focused on forthcoming IPOs. Anthropic, meanwhile, still plans to go public in the fall and has reportedly targeted the Nasdaq for its highly anticipated debut. The tech sector was already undergoing a period of scrutiny regarding valuations and escalating capital expenditures, which led to a significant market unwind in July.
Pressure is mounting on Washington to make a real effort to tackle the dangers of rapidly developing artificial intelligence, but events on the political calendar are likely to make any debate slow and complicated.
President Trump, for his part, appears to be hardening his position that policymakers should stay on the sidelines.
With lawmakers focused on the midterm elections and Trump himself gearing up for a meeting with Chinese President Xi Jinping this month, meaningful action appears unlikely to even be fully debated before winter, though the House is set to vote this week on AI data center costs.Congress is a deliberative body [and lawmakers] need to catch up,” House Speaker Mike Johnson said on Sunday in one of many signs in recent days that any action will be slow.
Macroeconomic Headwinds and Financial Insights
Several macroeconomic factors contributed to the market’s mixed performance. Oil prices continued to climb after Saudi Arabia shut down a key pipeline in the Middle East, and the global conflict in the region contributed to this upward trend. Brent crude futures traded near $106 per barrel.
The elevated yields on government bonds also weighed on stocks. The 10-year Treasury yield briefly exceeded the 5% threshold, a level not reached since 2023. Furthermore, the 30-year yield remained high at 5.33% ahead of the Federal Reserve’s policy meeting scheduled for the week.
Regarding Federal Reserve expectations, trader bets on a rate hike had surged to 88% following a recent consumer inflation report. This high consensus contrasts with statements from Fed Chairman Kevin Warsh, who has emphasized that he will not provide forward guidance on policy decisions.
If Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT) do in fact slow the pace of AI development, as they suggested over the weekend, it could present a “relatively big risk” for markets and the economy, according to Schwab Center for Financial Research’s Kevin Gordon. Investment in the AI build-out has underpinned the US economy this year, with strength coming from productivity gains and hyperscaler spending on data centers and infrastructure. If a mutual detente in the AI arms race were to take place, and if investment were to slow at a gradual pace while the labor market held up, there could be “a much easier … transmission back from business investment towards the consumer,” Gordon told Yahoo Finance.
However, “if it’s a sharper slowdown,” Gordon continued, “then you probably have a recessionary-like impact. That’s just sort of the math of what capex and specifically the AI capex has meant for the broader US economy.”
Corporate and Financial Updates
In separate corporate news, shares of Bank of America (BAC) fell by more than 5% on Monday. This decline followed CEO Brian Moynihan presenting an underwhelming forecast for the bank’s quarterly dealmaking fees. Moynihan stated that expected investment banking fees for the third quarter would fall between $1.6 billion and $1.8 billion, representing a decrease of approximately 10% to 20% compared to the $2 billion earned in the third quarter of the previous year. He noted that while the broader investment banking market is expected to be down about 10%, the deal pipeline remains robust.
Conversely, the heightened AI fears provided a boost to the cybersecurity industry. Shares of companies such as Okta, CrowdStrike, and Palo Alto Networks saw notable increases in early trading, as enterprises sought solutions to protect their infrastructure from potential AI-related threats.
