AI Caution and Fed Hike Fears Drive Tech Sell-Off
Asian tech stocks fell sharply as AI safety calls and expected interest rate hikes pressured valuations.
Tech stocks across Asia suffered significant losses Monday as industry leaders urged a pause in artificial intelligence development. The sell-off was compounded by rising oil prices following a Saudi pipeline closure and expectations that the Federal Reserve will hike interest rates to combat persistent inflation. Traders reacted to warnings from top AI executives that rapid advancement could outpace human control, leading to a broad retreat from high-growth technology sectors.
The decline was led by semiconductor and infrastructure firms. SoftBank, a major Tokyo-listed tech investor, dropped more than 12 percent. Chipmakers Kioxia and Advantest lost over seven and two percent respectively, while South Korean giants SK hynix and Samsung also fell sharply. The Kospi index led regional losses, with Tokyo, Hong Kong, Shanghai, Taipei, and Manila markets all closing lower. Only Sydney, Singapore, and Wellington posted gains in the broader Asian session.
AI Leaders Urge Development Pause
Dario Amodei, CEO of Anthropic, called for AI companies to coordinate a slowdown to better understand risks associated with recursive self-improvement. He warned that unchecked development could exceed human ability to control these systems. Sam Altman of OpenAI and Elon Musk of xAI publicly supported the caution, with Musk stating that Amodei was right. These comments followed a researcher’s resignation from Anthropic over fears of losing control, and another researcher’s public assessment that AI could pose an existential threat within a decade.
Fed Hike Expectations Rise
Market pressure intensified as data showed US inflation remaining well above the Federal Reserve’s two percent target. The swaps market now implies a 92 percent probability of a rate hike this week, with 50 basis points of cumulative tightening assumed by year-end. Chris Weston at Pepperstone noted that a hiking cycle rarely favors risk assets, especially when nominal and real Treasury yields are breaking to new highs. This macroeconomic backdrop made tech stocks particularly vulnerable to negative sentiment.
Political Reaction To AI Safety
US President Donald Trump voiced opposition to the calls for slowing AI development, while House Speaker Mike Johnson urged calm, stating that panic was unnecessary. Despite this political pushback, traders continued to sell tech holdings. The combination of safety concerns and monetary tightening created a dual headwind for the sector, overshadowing any short-term operational wins by individual companies. The market response reflected a re-rating of risk premiums for the entire technology group.
