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AI Stocks Falter on Safety Concerns as Surging Oil Prices Fuel Fed Rate Hike Bets
Markets are contending with dual headwinds as calls for a slowdown in artificial intelligence development pressured technology stocks while a sharp rise in oil prices bolstered expectations for an imminent Federal Reserve interest rate hike.
AI Rally Hits Headwinds on Safety Warnings
AI-related stocks, a major driver of market gains, faced a downturn Monday following calls from prominent industry figures to slow the pace of development due to potential risks. Nasdaq futures traded in the red and Asian markets closed lower, with chipmakers leading the declines.
The cautious sentiment follows a statement from OpenAI CEO Sam Altman, who said the firm will likely postpone its highly anticipated IPO until 2027, calling a public offering this year "ill-advised." The shift in tone threatens a sector that has seen tremendous growth; MSCI’s AI stock index has surged more than 120% since the 2022 launch of ChatGPT, according to Reuters analysis.
AdSurging Oil Prices Intensify Fed Pressure
In energy markets, Brent crude oil jumped to over $108 per barrel on Monday. The price increase was fueled by escalating geopolitical tensions in the Middle East, including attacks on shipping and the temporary closure of Saudi Arabia's East-West pipeline, which could impact up to 4% of global crude supply.
This energy price shock, combined with persistent underlying inflation pressures, has led futures markets to almost fully price in a Federal Reserve interest rate increase at its meeting this Wednesday. According to Reuters, investors are now focused on the central bank's updated economic and rate projections for clues on its future policy path, with as many as four total hikes now priced into the futures strip.
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