AI Development Calls Spark Selloff in US Equity Markets

US equity markets opened in the red on Monday as AI-linked names tumbled following calls from AI CEOs to slow down the pace of AI development. This has sparked weakness in semiconductor and memory names, which have been beneficiaries of the significant demand for computing infrastructure required to sustain the AI buildout.

The concerns over a slowdown in AI development are leading to a potential reevaluation of future demand, with some hyperscalers like Meta (META) and Google (GOOGL) outperforming as they may require less capital expenditure if the pace of AI development slows. Software names are also seeing gains as worries about increasingly advanced AI replacing existing software services ease.

Treasury yields have risen across the curve, with a flattening curve as expectations for a Fed rate hike at Wednesday's FOMC meeting continue to build following Friday's hotter-than-expected CPI report. An updated Reuters poll found 85% of forecasters now expect a hike this week, compared to the prior poll showing consensus for rates to remain unchanged.