The semiconductor stocks that have powered much of the market's gains over the past two years have had a rough week, caught between renewed debate over artificial intelligence safety and a Federal Reserve that just raised interest rates.
The trouble started over the weekend, when several prominent leaders in the AI industry called for a pause or slowdown in development, citing safety concerns about how quickly the technology is advancing. When markets opened Monday, shares of Nvidia fell about 2 percent in premarket trading, while Broadcom, Intel and Marvell Technology each dropped between 3 and 7 percent. The declines extended a pattern that has played out repeatedly this year, in which AI related stocks surge on strong demand for data center chips, then pull back sharply on any hint that the buildout could slow or that valuations have run too far ahead of near term earnings.
President Trump, speaking at the All In technology summit, pushed back on the safety warnings, calling concerns that AI could pose an existential risk to humanity a hoax, and separately phoned Nvidia chief executive Jensen Huang during the event. The exchange highlighted a widening gap between parts of the AI research community warning about the pace of development and parts of the political and business world eager to keep investment flowing. Nvidia remains the world's largest company by market value, and despite this week's swings its shares are still trading modestly higher for the year, though well below the 52 week high they touched in the spring.
The chip sector's swings this week also intersect with the broader bond market story. Because many AI companies are valued on the promise of future earnings, their stocks are especially sensitive to interest rates. This week's combination of a Fed rate hike and renewed AI safety debate gave investors two separate reasons to reassess how much they are willing to pay for chip and data center stocks in the near term.
Investors will be watching upcoming earnings from major chipmakers and any policy signals from Washington on AI regulation for clues about whether this week's pullback is a pause or something more lasting.
Why are AI chip stocks so volatile lately?
They are highly sensitive to both interest rates, since their value depends on future earnings, and to shifting sentiment about how fast AI spending and development will continue.