Wall Street closed lower Monday as warnings from leading artificial intelligence executives triggered a global semiconductor selloff while a 5% Treasury yield, $100-plus oil and expectations for a Federal Reserve rate hike added pressure across markets.
By yourNEWS Media Newsroom.
A sudden reassessment of the artificial intelligence boom collided with rising interest rates and expensive oil Monday, sending major U.S. stock indexes lower and delivering particularly heavy losses to semiconductor companies that have benefited from years of extraordinary AI investment.
Executives at Anthropic, OpenAI and xAI raised concerns about the dangers posed by increasingly powerful artificial intelligence systems and called for a slower approach to development, forcing investors to consider what a deceleration could mean for the enormous demand for chips, data centers and computing infrastructure that has helped propel markets to record highs.
The reaction was immediate across AI-linked stocks worldwide.
Nvidia fell 3.4%, Micron Technology lost more than 5%, and Broadcom and Advanced Micro Devices each declined more than 4%. The PHLX Semiconductor Index dropped 5.9%, making chipmakers one of the session’s largest sources of weakness.
The broader market followed them lower.
Preliminary closing data showed the S&P 500 losing 36.93 points, or 0.48%, to finish at 7,620.05. The Nasdaq Composite fell 145.25 points, or 0.55%, to 26,187.79, while the Dow Jones Industrial Average declined 151.66 points, or 0.29%, to 52,421.63.
The selloff illustrated how deeply the market’s recent performance has become connected to expectations for uninterrupted AI expansion.
Billions of dollars have poured into processors, networking equipment, data centers and other infrastructure needed to train and operate increasingly capable AI models. A meaningful slowdown imposed by companies themselves, regulators or new safety standards could alter assumptions about how quickly that spending continues.
The weekend warnings therefore struck directly at one of Wall Street’s most important growth narratives.
Anthropic CEO Dario Amodei has called for independent scrutiny of advanced AI developers and common safety standards as frontier systems become increasingly capable. OpenAI and xAI leaders have also raised concerns about accelerating development without adequate protections.
The pressure on equities was compounded by a second major market development: the benchmark 10-year Treasury yield crossed 5%.
The yield moved above that closely watched threshold Monday for the first time since October 2023 as investors confronted persistent inflation, heavy government and corporate borrowing, rising oil prices and concerns over the long-term U.S. fiscal outlook.
“The 10-year going above 5% is huge and speaks volumes, and it may pressure the Fed to do more than just one rate hike,” Jake Dollarhide, CEO of Longbow Asset Management, said.
A 5% Treasury yield matters well beyond the bond market.
Government borrowing costs help establish benchmarks throughout the economy, influencing mortgage rates, auto loans, business financing and municipal borrowing. Higher bond yields can also make stocks less attractive because investors can obtain comparatively strong returns from Treasury securities without accepting the same equity-market risk.
That competition becomes particularly significant for expensive technology stocks, whose valuations depend heavily on expectations of profits far into the future.
Investors now face the possibility that the Federal Reserve could add further pressure.
Markets were pricing approximately a 90% probability of a quarter-percentage-point rate increase Wednesday as policymakers respond to renewed inflation concerns, particularly those tied to rising energy costs.
A Reuters survey conducted after the latest inflation data found 86 of 101 economists expected the Fed to raise its benchmark rate by 25 basis points to a range of 3.75% to 4.00%, which would represent the central bank’s first increase since July 2023.
Oil supplied another source of inflation anxiety Monday.
Brent crude settled 1% higher at $105.68 per barrel as investors assessed new attacks on Saudi Arabian energy infrastructure and commercial shipping disruptions across the Middle East.
Saudi Arabia’s East-West pipeline has emerged as a particular concern because it provides a major route for moving crude toward the Red Sea while bypassing the Strait of Hormuz. Recent attacks have threatened up to approximately 4 million barrels per day of export capacity through the system.
Higher petroleum costs can spread rapidly through the broader economy by increasing expenses for transportation, manufacturing, agriculture and shipping, complicating the Federal Reserve’s attempt to bring inflation sustainably toward its 2% target.
The combination left Wall Street confronting three separate challenges during the same session: uncertainty about the future pace of AI development, borrowing costs associated with the 10-year Treasury yield above 5%, and oil prices remaining above $100 per barrel.
Not every technology company suffered.
ServiceNow, Adobe and Workday rallied Monday after experiencing substantial selling in recent sessions.
Those software companies had been under pressure because of concerns that increasingly capable AI systems could erode traditional software businesses and compress profit margins. The prospect of slower AI development produced a different calculation for investors, offering some relief to companies viewed as potentially vulnerable to rapid AI disruption.
The contrasting moves created a clear divide within technology stocks: companies selling the physical infrastructure behind the AI boom were hit hard, while several software companies that have recently been treated as possible victims of AI competition recovered.
Bank stocks faced their own company-specific pressure.
Bank of America declined after CEO Brian Moynihan said he expects the company’s investment-banking fees to decrease by at least 10% during the third quarter.
Monday’s losses also continued a pullback that has changed the valuation of the broader market.
With the S&P 500 declining while analysts maintain relatively strong earnings expectations, the benchmark is now trading at approximately 19 times projected earnings. That is its lowest forward valuation since April 2025, when President Donald Trump’s “Liberation Day” tariff announcements caused sharp volatility across global markets.
The lower multiple means stocks have become cheaper relative to expected profits, but the environment surrounding those valuations has also become more challenging.
Treasury yields have risen, oil prices have climbed, inflation remains elevated and markets increasingly expect the Federal Reserve to tighten monetary policy rather than provide relief.
The AI sector now adds another uncertainty.
For years, investors largely treated rapidly increasing AI spending as a powerful and durable source of demand for semiconductor companies. Monday’s selloff showed how quickly that assumption can be questioned when the people developing the technology themselves begin warning that progress may be moving too fast.
The stakes are especially high because AI-related investment has extended far beyond a handful of technology companies. It has helped drive corporate borrowing, construction of enormous data centers, power-sector investment and demand for advanced semiconductors and networking equipment.
Heavy issuance of corporate debt to finance record AI-related capital spending has itself contributed to the abundance of bonds competing for investors’ money, adding another source of pressure on Treasury prices and yields.
That creates an unusual feedback loop for markets: the AI investment boom has supported stocks while simultaneously contributing to enormous financing needs, and now questions about the pace of AI development are hitting chip shares just as higher yields make expensive equities more difficult to justify.
Monday’s decline was modest at the index level, but the forces underneath it were considerably larger.
Semiconductor stocks were repriced after AI leaders questioned the speed of development, the benchmark Treasury yield crossed a threshold not seen in nearly three years, oil remained above $100 and investors prepared for what is widely expected to be another turn toward tighter Federal Reserve policy.
Together, those developments have given Wall Street a new question to confront: whether the AI boom that helped lift markets to record levels can continue at the same pace in an economy where the technology’s own architects are urging caution and the cost of financing its expansion is becoming increasingly expensive.
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