Stocks Settle Lower as AI Slowdown Fears Weigh on Chipmakers

The S&P 500 Index ($SPX) (SPY) closed down by -0.48% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.82%. E-mini S&P futures (ESU26) fell -0.46%, and September E-mini Nasdaq futures (NQU26) fell -0.77%.

Stock indexes settled lower on Monday, with the Nasdaq 100 falling to a 6-week low. Weakness in chipmakers and AI-infrastructure stocks drove the broader market lower on Monday after leaders of the biggest artificial-intelligence firms proposed slowing the technology's development, raising concerns that efforts to rein in AI could curb billions of dollars in capital spending to build out the technology.

On the positive side, software stocks rose on Monday as the threat of an AI spending slowdown dampens the risk of disruption to software companies. Also, bond yields gave up an early advance and turned lower on Monday after crude oil prices fell from their highs when President Trump said that Ukraine and Russia agreed to not attack each other's energy targets.

AI stocks retreated on Monday after Anthropic CEO Amodei said his company would introduce fresh safeguards, urging the industry to slow the development of its most advanced AI models. OpenAI's Sam Altman and xAI's Elon Musk backed the proposal.

Stocks were also pressured on Monday as a rally in crude oil prices to a 3.75-month high raised inflation expectations and pushed global interest rates higher. The UK Gilt 10-year bond yield rose to a 19-year high of 5.43% on Monday, the 10-year German Bund rose to a 17-year high of 3.56%, and the 10-year T-note yield rose to a 2.75-year high of 5.01%.

Oct WTI crude oil prices (CLV26) rose more than +1% on Monday to a 3.75-month high on concern that global oil supplies will get even tighter after Saudi Arabia closed a major pipeline following attacks, disrupting a key route that bypasses the Strait of Hormuz. Saudi Arabia closed the East-West pipeline late last week, which carries 7 million bpd of crude, as a precaution following attacks by Houthi rebels and gave no indication of when it will reopen. The pipeline moves oil away from the Persian Gulf toward the Red Sea, where it can be loaded on tankers. Saudi Arabia told OPEC last Thursday that its crude production in August fell to 6.238 million bpd, the lowest since 1990.