Early trading on Asian stock exchanges saw tech stocks shedding some of the gains they had made recently. The selloff was driven by several factors that included a rise in crude oil prices, expectations of borrowing rate increases and growing calls from tech leaders to reduce the pace of AI development as greater understanding of the risks of the technology is attained.
On Saturday, Dario Amodei, Anthropic’s CEO, wrote an essay in which he urged the tech industry to collectively pump the brakes on the speed at which they were bringing new AI systems online. He explained that it was necessary to first understand how risks could be managed before additional advanced systems are created by AI labs.
Notable tech leaders like Elon Musk and Sam Altman, the CEO of OpenAI, agreed with the sentiments expressed by Amodei.
The markets’ response to this development was immediate. Tech stocks slid as investors sold their shares. This selloff was motivated by concerns that if AI development is deliberately slowed down, the valuations of tech firms could suffer since markets had priced in an accelerated pace of development of new AI products to keep stock prices rising.
An additional headwind to tech stocks comes from the escalation in the war between Iran and the U.S. Recent strikes and counterstrikes have caused oil prices to cross the key $100 price mark, and that rise has placed additional inflationary pressures on the global economy.
As a result, analysts expect the Federal Reserve to tighten monetary policy during its meeting this week. If lending rates rise, many AI development programs could slow down since most funding for the industry comes from borrowing directly from banks. Even company bonds would suffer if interest rates are increased because lenders expect a lower real yield in future from the money they lock up in bonds during an inflationary period.
Share prices of several tech companies consequently suffered losses as many investors opted to take their profits from the recent upward run while others got spooked by the alarm bell sounded by Amodei over the weekend and decided to sell their holdings.
SoftBank, an investment banking giant with heavy exposure to the tech industry, slid by 12% in early trading on Monday. Kioxia, a chipmaker, shed 7% while SK Hynix, TSMC and Samsung also recorded significant share price reductions.
It remains to be seen how other high-flyers like Micron Technology Inc. (NASDAQ: MU) fare over the coming days as markets continue assessing developing stories around AI and the FOMC meeting this week.
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