Investors Grow Cautious as AI Spending Slowdown Threatens Market Rally
Market Reactions and Investor Concerns Over AI Spending
NEW YORK, Sept 15 (Reuters) - Investors are showing some nervousness over the stock market's AI-led rally after industry leaders called for reining in the pace of development — although some say guardrails could ultimately benefit the AI sector.
Calls for Slowing AI Development
Recent dire pronouncements about AI potentially endangering humanity were followed over the weekend by calls from AI leaders, including Anthropic CEO Dario Amodei, to slow the rate of advancement and create more time to manage its risks.
The Impact of AI Spending on the Stock Market
Massive spending from tech giants to build AI data centers has benefited a wide swath of companies and their stock prices, helping the S&P 500 more than double since a bull market that began in October 2022. Wall Street has been on guard for any signs that such spending — which is expected to reach nearly $800 billion in 2026 — could lose steam.
"This becomes a problem if in fact you see orders being cancelled, you see data centers, construction deals being cancelled," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "I need to see something concrete that, in fact, there is a slowdown versus just talk."
Valuation Questions for Leading AI Firms
A forced pause from OpenAI and Anthropic, the leading AI developers, could raise questions about valuations for the two firms, both of which are expected to sell shares to the public in the future. With these companies eventually expected to be publicly owned, "shareholders are going to be demanding of them to continue to grow," Carlson said.
AI CAPEX Winners Hit
So far this year, the broad-market index has gained more than 11%, led by corporate profit growth boosted by the last few years of heavy spending.
The AI hyperscalers — Microsoft, Alphabet, Amazon, Meta Platforms and Oracle — are expected to plunk down around $795 billion this year in capital expenditures and nearly $1.08 trillion in 2027, according to BofA Global Research.
Much of that spending is being funneled toward semiconductor firms, whose shares and profits have soared this year, but bore the brunt of the selling on Monday. The Philadelphia SE Semiconductor Index is still up nearly 60% in 2026.
Market Sensitivity to AI Slowdown
"Markets are punishing the picks-and-shovels layer harder than the hyperscalers because it's the layer most exposed to a slowdown in the rate of capability improvement," said Erik Kratz, chief investment officer and co-head of wealth at Arena Private Wealth in Chicago.
However, Kratz said there could be a silver lining in greater scrutiny of the industry's safety.
"The buildout doesn't stop because the CEOs asked for guardrails. If anything, a credible safety framework makes the long-duration capex easier to underwrite."
AI Doubts Add to Rate Worries for Stocks
The recent jolt reminded some investors of the market's stumbles in early 2025 following the emergence of China's DeepSeek AI model, which raised doubts over the pace of spending on AI infrastructure. That selloff proved to be a short-lived hiccup for the AI trade.
Regulatory and Geopolitical Risks
However, investors were now weighing a far broader set of risks, including the possibility of more government regulation, even though President Donald Trump stated on Monday that the threats to safety from AI were "a hoax," and downplayed the need for regulation.
"The real risk isn't that development actually slows — it's regulatory overreaction," Kratz said.
Other Factors Influencing AI Growth
While growth concerns may not cut short the investment boom, there are a number of factors that may affect how fast AI develops.
Michael Bruun, global co-head of private equity at Goldman Sachs Alternatives, said investors were navigating whether there would be "more or less regulation, whether it's more or less geopolitical tension, whether there are new paradigms on the technology side emerging."
Still, Bruun said he saw opportunities to deploy capital "into the epicenter of AI."
Market Vulnerability Amid AI Uncertainty
If doubts about AI grow, shares could be vulnerable given that both the S&P 500 and Nasdaq Composite are both only about 2% below all-time highs, and as the market faces down higher bond yields, rising oil prices and the possibility that the Federal Reserve will raise interest rates this week to rein in inflation.
"AI semiconductor and infrastructure stocks have long priced in an uninterrupted capex boom, leaving virtually zero margin of error for an industry-imposed speed limit," said James Humphries, managing partner at Mindset Wealth Management in Indianapolis, Indiana. "If the market is already staring down stickier-than-expected inflation and a murky Fed rate path, cutting off the market's primary growth engine leaves the broader indices completely exposed to those macro headwinds.”
(Reporting by Lewis Krauskopf and Laura Matthews, additional reporting by Saeed Azhar and Saqib Iqbal Ahmed; editing by Megan Davies)
