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NEW YORK: Investors are showing some nervousness over the stock market\u2019s AI-led rally after industry leaders called for reining in the pace of development \u2014 although some say guardrails \u200bcould ultimately benefit the AI sector.<\/strong><\/p>\n Recent dire pronouncements about AI potentially endangering humanity were followed over the weekend by calls from AI leaders, including Anthropic CEO \u200cDario Amodei, to slow the rate of advancement and create more time to manage its risks.<\/span><\/p>\n Massive spending from tech giants to build AI data centers has benefited a wide swath of companies and their stock prices, helping the S&P 500 more than double since a bull market that began in October 2022. Wall Street has been on guard for any signs that such spending \u2014 which is expected to reach nearly $800 billion in 2026 \u2014 \u200bcould lose steam.<\/span><\/p>\n \u201cThis becomes a problem if in fact you see orders being cancelled, you see data centers, construction deals being cancelled,\u201d said Chuck Carlson, chief executive \u200bofficer at Horizon Investment Services in Hammond, Indiana. \u201cI need to see something concrete that, in fact, there is a slowdown versus just talk.\u201d<\/span><\/p>\n A \u2060forced pause from OpenAI and Anthropic, the leading AI developers, could raise questions about valuations for the two firms, both of which are expected to sell shares to the public in \u200bthe future. With these companies eventually expected to be publicly owned, \u201cshareholders are going to be demanding of them to continue to grow,\u201d Carlson said.<\/span><\/p>\n So far this year, the \u200bbroad-market index has gained more than 11%, led by corporate profit growth boosted by the last few years of heavy spending.<\/span><\/p>\n The AI hyperscalers \u2014 Microsoft, Alphabet, Amazon, Meta Platforms and Oracle are expected to plunk down around $795 billion this year in capital expenditures and nearly $1.08 trillion in 2027, according to BofA Global Research.<\/span><\/p>\n Much of that spending is being funneled toward semiconductor firms, whose shares and profits have soared this year, but bore \u200bthe brunt of the selling on Monday. The Philadelphia SE Semiconductor Index is still up nearly 60% in 2026.<\/span><\/p>\n \u201cMarkets are punishing the picks-and-shovels layer harder than the hyperscalers because it\u2019s the layer \u200bmost exposed to a slowdown in the rate of capability improvement,\u201d said Erik Kratz, chief investment officer and co-head of wealth at Arena Private Wealth in Chicago.<\/span><\/p>\n However, Kratz said there could be a silver \u200clining in \u2060greater scrutiny of the industry\u2019s safety.<\/span><\/p>\n \u201cThe buildout doesn\u2019t stop because the CEOs asked for guardrails. If anything, a credible safety framework makes the long-duration capex easier to underwrite.\u201d<\/span><\/p>\n The recent jolt reminded some investors of the market\u2019s stumbles in early 2025 following the emergence of China\u2019s DeepSeek AI model, which raised doubts over the pace of spending on AI infrastructure. That selloff proved to be a short-lived hiccup for the AI trade.<\/span><\/p>\n However, investors were now weighing a far broader set of risks, including the possibility of more government regulation, even \u200bthough President Donald Trump stated on Monday \u200bthat the threats to safety from AI were \u201ca \u2060hoax,\u201d and downplayed the need for regulation.<\/span><\/p>\n \u201cThe real risk isn\u2019t that development actually slows \u2014 it\u2019s regulatory overreaction,\u201d Kratz said.<\/span><\/p>\n While growth concerns may not cut short the investment boom, there are a number of factors that may affect how fast AI develops.<\/span><\/p>\n Michael Bruun, global co-head of private equity \u200bat Goldman Sachs Alternatives, said investors were navigating whether there would be \u201cmore or less regulation, whether it\u2019s more or less geopolitical tension, \u200bwhether there are new \u2060paradigms on the technology side emerging.\u201d<\/span><\/p>\n Still, Bruun said he saw opportunities to deploy capital \u201cinto the epicenter of AI.\u201d<\/span><\/p>\n If doubts about AI grow, shares could be vulnerable given that both the S&P 500 and Nasdaq Composite are both only about 2% below all-time highs, and as the market faces down higher bond yields, rising oil prices and the possibility that the Federal Reserve will raise interest rates \u2060this week to \u200brein in inflation.<\/span><\/p>\n \u201cAI semiconductor and infrastructure stocks have long priced in an uninterrupted capex boom, leaving virtually zero \u200bmargin of error for an industry-imposed speed limit,\u201d said James Humphries, managing partner at Mindset Wealth Management in Indianapolis, Indiana. \u201cIf the market is already staring down stickier-than-expected inflation and a murky Fed rate path, cutting off the market\u2019s \u200bprimary growth engine leaves the broader indices completely exposed to those macro headwinds.\u201d<\/span><\/p>\n<\/div>\nAI CAPEX WINNERS HIT<\/span><\/h2>\n
AI DOUBTS ADD TO RATE WORRIES FOR STOCKS<\/span><\/h2>\n