Could AI Safety Fears Slow the Progress of Wall Street’s Artificial Intelligence Boom?

The recent emergence of fresh concern over the long-term safety of artificial intelligence may lead to the loss of confidence in the long-term growth of some of the brightest tech stocks in the US.

Artificial intelligence stocks have faced a wide range of challenges in recent months, including the emergence of fierce competition from China and capex concerns among hypescalers, but few would’ve banked on a former Anthropic employee warning of a mass extinction event sparking a new wave of uncertainty for Wall Street’s strongest industry over the past four years.

In a post on X, Jacob Coxon, a former AI researcher at Anthropic and previously at OpenAI, announced that he had quit his role before he would have received equity in the company, claiming that the people leading the artificial intelligence buildout believe that AI “could kill us all by the end of the decade.”

Coxon’s warning would soon be echoed by another Anthropic researcher, Evan Hubinger, who factored in the probability of extinction at a greater than 10% chance.

The claims have led to widespread public alarm, as commentators have mulled over the validity of the statements and whether they’re genuine warnings or merely attempts by existing AI leaders to establish tight regulatory controls that would stunt the growth of frontier models that may soon be market rivals.

Following a letter published by Anthropic CEO, Dario Amodei calling for a slowdown to the pace of the ongoing AI buildout, rival executives Sam Altman of OpenAI and Elon Musk backed his statements, making the prospect of tighter controls over the development of artificial intelligence models increasingly likely.

But how does this sudden change of sentiment towards the rapid growth of artificial intelligence change the outlook for AI on Wall Street, with many firms trading at a significantly higher price-to-earnings (P/E) ratio on the expectation of sustained growth into the future?

Chipmakers Take a Hit

Wall Street absorbed the weekend’s flare up of AI fears with marginal losses across the board, with the Dow Jones Industrial Average retreating around 0.29%, the S&P 500 dipping 0.48%, and the tech-heavy Nasdaq Composite shedding 0.56%.

But the biggest losers from the flare up of safety concerns were the chipmakers, which collectively fell over worries that future demand could be impacted by a tighter future regulatory outlook.

Worryingly, the Philadelphia Semiconductor Index, which tracks a group of chipmakers, fell as much as 6%. Zooming in to the impacted stocks, Arm Holdings (NASDAQ: ARM) tumbled 10%, while Nvidia (NASDAQ: NVDA) slipped 3% lower, as Advanced Micro Devices (NASDAQ: AMD) and Micron Technology (NASDAQ: MU) fell 4% and 5%, respectively.

Cybersecurity stocks appeared to benefit from fears over the future of artificial intelligence, with firms like CrowdStrike (NASDAQ: CRWD) and Palo Alto Networks (NASDAQ: PANW) posting gains of more than 15% and 12%, respectively, since the weekend.

Are Hyperscalers Exposed?

While the Magnificent Seven collective of AI-focused stocks and hyperscalers largely absorbed the flare up of negative sentiment surrounding the technology’s future, there are new questions over the sustainability of the artificial intelligence boom should tighter controls be placed on its buildout.

“The Magnificent Seven have shrugged off AI fears in the short term, with Roundhill’s MAGS ETF still sitting at around 2% growth since the start of September, but their long-term outlook has just become a lot more clouded,” explained Vsevolod Smirnov, CMO at Just2Trade. “Demand is still far outstripping supply across the board, but the prices of AI hyperscalers reflect a near-perfect run at their current rates.”

“Take Alphabet, an artificial intelligence leader that’s reportedly close to reaching autonomous recursive self-improvement (RSI) for its DeepMind model. At a market capitalization of $4.18tn and a trailing P/E of 17.35x, has it got room to slow down while regulators work out whether it’s safe or not?”

Given that President Trump has already labeled AI safety fears a ‘hoax,’ it seems likely that stronger regulatory oversight won’t be passed quickly to control the rate of growth within the industry.

From the perspective of the markets, this is more likely to point more towards an era where AI innovators invest more into positive PR and marketing to control perceptions while growth continues at an increased pace.

This could mean that afflicted semiconductor stocks may present themselves as a discounted opportunity for investors, but at a time when both Anthropic and OpenAI are looking to go public in the future, we may be far from finished as far as statements regarding AI safety is concerned.

What’s Next for AI?

The next big moment for the technology is likely to be the visit of Chinese President Xi Jinping to the White House on September 24, where an agreement over the safe progression of AI could be mulled over by the two leaders.

However, given the long-standing difficulty both presidents have in seeing eye-to-eye, investors may have to become accustomed to longer periods of mixed sentiment surrounding artificial intelligence over the foreseeable future.

While this state of uncertainty could unveil new trading opportunities for traders, AI investors may have to learn to live with increased volatility among stocks as safety falls further into the spotlight.