The selloff rippled through the industry, where companies are increasingly relying on debt and circular financing to fund ambitious AI spending plans even as borrowing costs continue to rise

AI-linked stocks plunged on Monday after leaders of big artificial intelligence companies warned of potentially existential risks from the technology, shaking confidence in the industry whose vast infrastructure spending has driven world stock 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 borrowing costs worldwide, 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 AI could be misused. 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.

U.S. stock market’s major tech index, the Nasdaq 100, slipped 1.2% to a six-week low in early trading as chip stocks, which have led the AI rally, dropped the most, although it pared losses in early afternoon and was last down 0.4%.

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 declined 5.2%, with Nvidia down 3%, Advanced Micro Devices down 4.5% and Micron dropping 5.4%.

Semiconductor equipment makers Lam Research, Applied Materials and tech utility Bloom Energy shed more than 6% each.

Earlier in the day, Europe’s tech sector dropped 2.2%, dragged by ASML’s 6% decline, alongside steep losses in Infineon and Siemens Energy, while in Asia, SoftBank slumped more than 10% and chipmakers TSMC and SK Hynix also pulled back.