Anthropic CEO Dario Amodei published an essay, “We Must Pace the Frontier,” on his personal website last weekend that is weighing on AI stocks. Amodei argues AI labs need to slow development to manage the risks that come with capabilities improving faster than our ability to understand and control them. Sam Altman and Elon Musk both publicly agreed with Amodei, an unusual alignment among bitter rivals. While Amodei’s argument is very sensible, reality and the race for AI dominance are a strong counterargument.
Amodei acknowledges the pros and cons of slowing development:
Not building the technology deprives humanity of benefits or simply places AI in the hands of authoritarian powers, while building it too fast is reckless.
President Trump’s answer was immediate. He rejected any slowdown outright, to wit:
We’re leading China in AI, and, frankly, I want to keep it that way, because whoever wins AI wins.
House Speaker Mike Johnson echoed his sentiment:
If Congress just races in and does some sort of emergency session to try and regulate AI, we will lose the race to China.
Beijing dismissed the safety concerns as “fear-mongering.” Based on comments from leaders, China views the technology through a security lens, not humanity’s shared risk.
Amodei’s proposal works only if China and the US pace themselves in tandem, yet Washington and Beijing have made clear they view AI primarily as a race to win, not a risk to manage.
The graphic below, courtesy of Finviz, shows that AI-related stocks were hit hardest Monday morning, but most other sectors were spared.
What To Watch Today
Earnings
Economy
Industrials vs. Energy: The Next Big Rotation?
The graphic below shows that energy stocks are very overbought on a relative basis, while industrials are very oversold. The large divergence suggests a rotation into industrials and out of energy is likely. However, and this is important, the Iranian conflict and its impact on oil prices are driving the two sectors in opposite directions. They may continue to do so until oil prices fall appreciably. That said, industrials and other sectors more directly impacted by higher oil prices are worth following for when the “peace trade” starts.
It’s also worth noting our divergence indicator in the second graphic is starting to perk up. While this indicates weakening breadth, we may see it worsen until oil prices decline. As with industrials versus energy, the market is increasingly affected by higher oil and bond yields. Trade with caution, and start making a list of which stocks and sectors may outperform on a lasting peace agreement.
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