AI-linked stocks slump after top lab CEOs call for slowing technology's development

Highlights:

• US frontier AI lab CEOs call for tapping the brakes on technology's development amid safety worries
• OpenAI will not proceed with an IPO this year, says CEO
• SoftBank, Tokyo Electron, Kioxia shares slide in Japan
• Chipmakers TSMC, SK Hynix and Samsung fall
• Chinese AI-linked shares also lower in Shanghai and Hong Kong

AI-connected stocks fell sharply on Monday after the CEOs of the US companies developing the most advanced AI models warned the pace of development must slow to prevent threats to humanity.

Nasdaq e-mini futures fell 1.3% during Asian trade. Shares in ChatGPT-maker OpenAI's investor SoftBank tumbled as much as 13.2% in Japan.

Anthropic CEO 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 misuse of artificial intelligence. Both Elon Musk, who runs xAI, and Sam Altman, CEO of OpenAI, said that they agree with Amodei.

The Anthropic CEO 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."

OpenAI's Altman also said the company would not proceed with an IPO this year, citing safety concerns.

In Japan, memory chipmaker Kioxia plunged 9.8% initially, while chip supply chain company Tokyo Electron ell 3.7%.

In Taipei, Taiwan Semiconductor Manufacturing Company slipped 1.2%, while in South Korea SK Hynix slid 5.3% and Samsung Electronics fell 3.7%.

"Selling pressure is likely to hit AI and semiconductor-related stocks in Tokyo following a series of weekend comments calling for a slowdown in the pace of AI development," Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.

"Additionally, uncertainty surrounding the situation in the Middle East continues to weigh on sentiment."

In Shanghai, memory chipmaker CXMT dropped as much as 3.6%, while Semiconductor Manufacturing International Corporation fell 2.6%.

In Hong Kong, Zhongji Innolight shed as much as 6.7% at one point, while Minimax dropped as much as 7.8%. Shares of Z.ai, the developer of the GLM AI series, also tumbled as much as 10.5% after making a discounted share placement.

"Unacceptable" risks

San Francisco-based Anthropic released a threat intelligence report on Thursday detailing how several actors had used its Claude AI models for activities ranging from weapons development and cyber operations to surveillance and fraud.

Alarm about the potential harm from AI grew 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."

OpenAI's Altman said in an interview that risks of human extinction posed by AI were "unacceptable".

And while several US lawmakers have raised concern about AI's rapid progress and called for new rules, US President Donald Trump on Sunday likened AI critics to "very negative forces" bringing up scenarios that will not happen, and said he wanted to make sure that the US remains the industry leader.

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, according to two people briefed on the plans.

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.

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 the warnings were "hype and puffery" and "cover for real uncontrollable slowing growth".

Others said the warnings would be an overhang.

"In the short term, these warnings could still weigh on AI and chip stocks," said Charu Chanana, chief investment strategist at Saxo Bank in Singapore.

"Their valuations assume both strong demand and a relentless pace of technological progress," she said. "When expectations are this high, even a possible delay can trigger profit-taking."

But the bigger question for markets around AI was who would ultimately earn the return on all the capital being spent on building new capacity, said Sebastien Mallet, portfolio manager at T. Rowe Price in London.

"There is little doubt that AI will change the world," he said. "But that does not necessarily mean every investment being made today will generate an attractive return."