US Stock Futures Plummet Amid AI Development Concerns and Oil Price Surge
US stock futures plummeted on Monday as concerns about the pace of artificial intelligence (AI) development collided with rising oil prices ahead of the Federal Reserve's interest rate decision. Nasdaq 100 futures dropped around 542 points, or 1.8%, while S&P 500 contracts lost 0.7% and Dow futures slipped 0.2%. The sell-off was sparked by a 'safety discount' on frontier-model AI investment speed, with investors pricing in slower chip demand and data-center spending.
Nvidia, Intel, and Marvell shares fell by more than 2%, 5%, and 5% respectively, after top AI executives called for a slower pace of development. This shift has created an unusual rotation, with software companies like ServiceNow, Atlassian, Adobe, and Workday gaining around 3.5% to 4%. Analysts describe this emerging trade as 'long enterprise software and short AI hardware', where slower frontier-model investment could hurt chip demand while giving software companies more time to monetize AI inside existing workflows.
The combination of an AI valuation reset and oil-driven inflation shock is creating a challenging backdrop for markets. Brent crude traded near $108, while the 10-year Treasury yield hovered just below 5%, keeping pressure on expensive growth shares. The Federal Reserve's decision on Wednesday is now seen as a potential surprise, with investors pricing in a roughly 87% chance of a 25-basis-point hike.