Stocks dented by AI warnings, oil jumps again

Global stocks dipped on Monday, as investors reacted to a decline in AI shares and a surge in oil prices ahead of anticipated interest rate hikes in the US and Japan. AI-linked stocks suffered further losses after leaders from OpenAI and Anthropic urged a slowdown in development to mitigate risks and safeguard humanity. Oil futures surged by nearly 3% following attacks on Saudi Arabia's oil infrastructure, as well as a postponed meeting in Oman to discuss opening the Strait of Hormuz.

The US Consumer Inflation Report exceeded expectations, heightening the probability of the Federal Reserve raising rates this week, marking its first hike since mid-2023. The European Central Bank had already increased rates, signaling a potential series of hikes if inflation continues to rise. Despite high yields and oil prices, there hasn't been significant turmoil in the equity market.

Nonetheless, the ongoing disruption in Hormuz could necessitate additional rate hikes by central banks, which investors are pricing in. The Fed appears more eager to act than it did previously, as do the ECB and the BoJ. The immediate concern for markets is a slowdown in spending on AI advancements, particularly after Altman announced that his company, OpenAI, would not pursue an IPO this year due to safety concerns.

This unified statement from prominent tech CEOs is casting a shadow over the AI sector, potentially triggering a sharp sell-off in chip stocks and other AI-related components at the beginning of the trading week.