Analysts see AI slowdown calls as regulatory push, not spending threat

Investment in AI infrastructure has heavily favored semiconductor firms, helping to propel their shares and profits higher this year. The sector nevertheless bore the brunt of Monday's selloff, though the Philadelphia Semiconductor Index .SOX remains up over 57% year-to-date.

BofA analysts, however, said hyperscalers might face potential competing pressures, as slower AI development could help open-source rivals close the technology gap, while tighter regulation may strengthen the position of large, established cloud providers.

Calls from AI leaders to slow development have unsettled investors, but some analysts say they do not necessarily signal lower AI spending and are largely a bid to shape future regulation.

Recent warnings that AI could pose a threat to humanity were followed over the weekend by calls from industry leaders, including Anthropic CEO Dario Amodei, to slow the pace of development and allow more time to address potential risks.

“We believe, (the calls) were also driven by a desire to shape a targeted, capability-based regulatory framework before a more systemically consequential AI incident prompts a broader and potentially less technically informed response,” analysts at Citigroup said.

Big Tech's race to build AI data centers has driven gains across the corporate sector and helped power the rally in the S&P 500 .SPX, which is up over 11% so far this year. However, Wall Street investors remain alert to any signs that this spending boom, projected to approach $800 billion in 2026, may be losing momentum.

“Pacing does not necessarily imply lower capex,” analysts at UBS Global Wealth Management said.

Citi echoed that view, adding that pacing may change the mix and timing of AI investment more than its overall magnitude, tempering near-term frontier-training demand while supporting continued spending on inference, deployment, safety, and infrastructure.