By Johann M Cherian and Gregor Stuart Hunter

Sept 14 (Reuters) – AI-linked stocks plunged worldwide on Monday after leaders of the biggest artificial intelligence companies warned of risks from rapid development, the starkest threat yet to the billions of dollars being poured into the industry that have driven world markets to record highs.

The selloff rippled through the industry, where companies are increasingly relying on debt and circular financing to fund ambitious AI spending plans even as global borrowing costs, reflected in multi-year-high bond yields, continue to rise.

Anthropic CEO Dario Amodei, in a lengthy essay shared on X on Saturday, called on AI companies to slow the rate at which they advance model capabilities amid mounting fears of misuse of artificial intelligence. Both Elon Musk, who runs xAI, and Sam Altman, CEO of OpenAI, said they agree with Amodei.

Altman also said the company would not proceed with an IPO this year, citing safety concerns.

Wall Street’s elite tech index, the Nasdaq 100, slid 1.2% to a six-week low in early trading as chip stocks, which have led the AI sugar rush, fell the most.

“If this does lead to sort of a slowdown and a rethink of AI spending, that will have ramifications for the economy and some important sectors of the stock market, because essentially, we’ve been running hot based on AI spending,” said Steve Sosnick, chief market analyst at Interactive Brokers.

The Philadelphia chip index dropped 5.1%, with Nvidia down 3.6%, Advanced Micro Devices off 5.6% and Micron falling 6%, while Musk’s SpaceX shed 1.6%.

Semiconductor equipment makers Lam Research and Applied Materials tumbled 6% each, while tech utilities Bloom Energy lost 6.8% and GE Vernova declined 7.4%.

Europe’s tech sector fell 2.2%, dragged by ASML’s 5.9% decline, alongside steep losses in Infineon and Siemens Energy, while in Asia, SoftBank plunged as much as 13.2% and chipmakers TSMC and SK Hynix also retreated.

“UNACCEPTABLE” RISKS

Alarm about the potential harm from AI spiked earlier this month when Anthropic researcher Jacob Coxon resigned, stating that the “people building AI earnestly believe that it could kill us all by the end of the decade.”

A few days later, the San Francisco-based AI lab released a threat intelligence report detailing how its Claude AI models were used for activities ranging from weapons development and cyber operations to surveillance and fraud.

Over the weekend, Amodei wrote that in six to 12 months, AI agents “could be capable of taking over the entire internet potentially causing hundreds of billions of dollars in damage.” Separately, OpenAI’s Altman said in an interview that risks of human extinction posed by AI were “unacceptable”.

And while several U.S. lawmakers have raised concern about AI’s rapid progress and called for new rules, U.S. President Donald Trump said that a “sick conspiracy” against AI and data centres exists, appearing to play down concerns expressed by industry leaders.

AI-related trades have powered much of the gains in global equities since OpenAI released ChatGPT in 2022, but more recently cyberattacks by rogue AI agents and public discontent with data centre construction have raised opposition to the development of the industry.

The U.S. and Chinese governments are expected to hold AI safety talks as part of bilateral discussions taking place this month, Reuters reported. But China’s state-backed Global Times blasted the Anthropic essay in an editorial, calling it a “Cold War playbook” intended to curb the country’s technological development.

A growing concern for OpenAI and Anthropic is the rising competition from more affordable Chinese models such as Moonshot AI’s Kimi K3, Alibaba’s Qwen and DeepSeek’s offerings, which could pressure the pricing of larger, more costly models.

NOT ALL BELIEVE THE WARNINGS

Some investors dismissed the warnings from Anthropic and OpenAI.

Michael Burry, whose prescient bets against the U.S. housing market before the 2008 financial crisis were chronicled in the movie “The Big Short”, said in a message on X the warnings were “hype and puffery” and “cover for real uncontrollable slowing growth”.

Others have argued that record capital spending commitments suggest AI development is unlikely to slow, such as Morgan Stanley’s CEO, Ted Pick, who forecast earlier this year that AI spending will surpass $1.3 trillion by 2027.

“The key question is whether this is the first sign that the extraordinary AI investment cycle might eventually moderate. For now, that seems unlikely. The competitive race between companies and countries remains intense, and it’s difficult to imagine firms voluntarily stepping back while rivals continue to push ahead,” Deutsche Bank said in a note.

Meanwhile, Amodei’s Anthropic has pushed ahead with its public debut, expected next month as sources told Reuters that the company is in talks to bring in Nvidia as an anchor investor.

Japanese chipmaker Kioxia Holdings is also considering raising at least $10 billion by listing American depositary receipts, a report said.

(Reporting by Gregor Stuart Hunter in Singapore, Johann M Cherian, Purvi Agarwal and Utkarsh Tushar Hathi in Bengaluru; Additional reporting by Rocky Swift in Tokyo; Editing by Muralikumar Anantharaman and Saumyadeb Chakrabarty)