TLDR
- Citi is telling investors the semiconductor pullback is a buying opportunity, saying AI spending fears are overdone
- Nvidia and Broadcom management both pushed back on slowdown concerns, with Broadcom targeting $115 billion in AI chip revenue by fiscal 2027
- Anthropic CEO Dario Amodei called for a multilateral AI development slowdown, backed by Sam Altman and Elon Musk
- The Dow fell 152 points, the S&P 500 dropped 37 points, and the Nasdaq slid 146 points on Monday
- Oil futures hit $101.39 a barrel, rising for the ninth time in ten sessions, pushing inflation and rate expectations higher
U.S. stocks fell on Monday as a call for slower AI development rattled semiconductor shares, while Citi told investors the selloff looks like a chance to buy.
The Dow Jones Industrial Average dropped 152.09 points, or 0.29%, to close at 52,421.20. The S&P 500 fell 37 points, or 0.48%, to 7,619.98. The Nasdaq Composite slid 146.62 points, or 0.56%, to 26,186.41.
What Triggered the Selloff
Anthropic CEO Dario Amodei called for a multilateral slowdown in AI model development, citing a whistleblower warning from a former employee about the risks of unchecked AI advances.
OpenAI CEO Sam Altman and SpaceX CEO Elon Musk both backed the call. Microsoft responded by publishing a provisional code of conduct for AI model training. Microsoft shares rose 2% to $505.41.
Semiconductor stocks took the hardest hit. If major AI labs slow model development, demand for data centers could also slow, hurting chip sales and prices.
Nvidia shares fell 3.4% to $210.96. The PHLX Semiconductor index dropped 5.9%. Corning, which makes fiber-optic materials for data centers, plunged 14% to $143.60.
Citi Sees a Buying Opportunity
Citi said in a note Tuesday that fears of an AI spending slowdown are overdone. The bank pointed to comments from Nvidia and Broadcom management, both of whom pushed back on the slowdown narrative.
Broadcom CEO Hock Tan reaffirmed the company’s fiscal 2027 AI chip revenue target of $115 billion.
Citi said the strategic importance of AI leadership, especially given U.S.-China technology competition, makes a large pullback in AI investment unlikely. The bank also noted President Trump has argued the U.S. must maintain its tech edge over China.
Citi rates both Nvidia and Broadcom as Buy. Its price target on Nvidia is $315. Its target on Broadcom is $515.
The bank added that a slower rollout might not even be bad for stocks. More gradual AI infrastructure deployment could support longer-term capital investment, Citi said.
Oil futures also weighed on markets Monday, rising $1.34 to $101.39 a barrel. It was the ninth gain in ten sessions, with oil up 18% in September. Saudi Arabia shut a key pipeline, and Houthi militants tightened control over the Bab al-Mandeb strait.
The 10-year Treasury yield briefly topped 5% during the session, its highest since July 2007. Fed funds futures are pricing a 95% chance of a rate hike when the Fed meets Wednesday.
Federal Reserve Chairman Kevin Warsh is expected to raise rates to a range of 3.75% to 4%.
Bank of America fell 5.1% to $59.47 after its CEO warned investment banking revenue could decline this quarter.
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