A speed bump for AI
Recently there’s been a call by AI leaders to slow down the development of AI technology so that safety measures could be put in place. But what’s going on and how does it affect markets?
What's going on with AI?
In the wake of some high-profile security attacks within controlled AI test and evaluation environments, Sam Altman, head of Open AI, Elon Musk, head of SpaceX and Dario Amodei, head of Anthropic have all made calls for the pace of development to be slowed.
Sam Altman added that Open AI will not go public this year – a clear sign that the risks of something going wrong are being taken very seriously.
Those risks range from privacy concerns and hacks to the doomsday predictions that have dominated the new headlines.
With AI largely unregulated, the big players are left to their own devices when it comes to ethics and security.
Greater oversight could support everyone by building trust, improving security and protecting human rights, especially if all the major AI firms came to agreement. The drive for that shared responsibility will need to come from the businesses themselves though. Donald Trump has dismissed the need for a slowdown. In his view, the existing rules provide enough oversight.
And of course, slowing down raises the risk that China could catch up with, or even overtake western AI technology. President Xi Jinping previously asked for a global AI governance pact, but details are unclear.
What’s going on in markets?
News of an AI slowdown has hit stocks hard. Around 41% of the US stock market has Tech/AI exposure, and in Emerging Markets there’s around 31% exposure.
In the US, markets opened down on Monday with HP, Intel, SanDisk and Oracle seeing losses.
In Asia, SK Hynix and Samsung – both makers of memory chips necessary for AI technology - saw steep falls, and Japan’s Softbank, a large investor in Open AI saw a 10% dip. European companies like chip machinery manufacturer ASML also saw an impact.
Software companies, which seemed under threat, have seen some rebounds as the slowdown may cause AI to have less of an impact on them.
AI hyperscalers have also issued large numbers of corporate bonds over the last few months. These are beginning to compete with government debt, which is pushing up yields.
As many AI companies and banks are invested in other AI companies, a wide range of different companies’ futures are tightly intertwined.
Given the many trillions invested in AI, investors will be watching the companies intending to slow down, alongside their suppliers, backers and governments very closely.
What’s our view?
AI has tremendous opportunity to change the face of the world. Love it or loathe it, the technology is likely here to stay. But not all of the current players will be winners.
With so much exposure to AI in major markets, and high levels in concentration in tech in both the US and emerging markets, diversification is key. We actively look for opportunities to create diversification in our asset allocation.
Part of our asset allocation is weighted towards the UK, smaller companies and alternatives, and we’ve previously moved from long-term government bonds to short duration ones to help manage volatility.
If you’re looking for help in managing the risk of heavy AI exposure or creating diversified portfolios for your clients, get in touch.
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