AI Leaders Push for a Slowdown
Anthropic CEO Dario Amodei published a 3,800-word essay titled "We Must Pace the Frontier," arguing for slower AI development. His point: model advances are outrunning humanity's ability to understand and control them. Elon Musk agreed. Sam Altman of OpenAI (OPENAI) agreed, and said OpenAI may delay its IPO to 2027.
The push started earlier. Anthropic safety researcher Jacob Coxin gave an interview mid-last week. He had worked at Anthropic only a short time and left over concern about humanity, so it was hard to know how much weight to give his words. That left people unsure. The story kept gaining traction, then the essay from the major AI figures over the weekend added clarity and concern. It now looks like the leaders in AI are agreeing to throttle back the pace so they can assess the risk.
This is a small, mostly self-regulating group. Governments cannot keep up with AI regulation because the field moves too fast, so the regulatory setup can't protect people in time. That leaves the task to the people who understand it best. I expect this self-imposed pullback to keep playing out over time.
Stock Reaction Is Mixed
The AI news split the tape. Down pre-market: AMD (AMD), Nvidia (NVDA), and CoreWeave (CRWV). Higher: Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT), with Microsoft only slightly up.
Crude Oil Pressures the Broad Market
The wider market is soft mainly because crude oil jumped back up. Crude fell Friday while the market rallied; now crude is higher and stocks are weak. That inverse relationship is still driving the market. The cause: a meeting between Iran and Oman scheduled in Muscat, meant to discuss opening the Strait of Hormuz and negotiations, was cancelled or postponed for "interests of consensus." That cancellation snapped crude oil futures back higher to start the day.
The Fed Decision Wednesday
Wednesday brings a Fed decision and a press conference from Fed chair Kevin Warsh. The setup is tense because he likely does not want to raise rates, but the market is signaling he should.
Jobs are strong enough, and inflation is not soaring but also not falling sharply, so the bigger risk sits with inflation than with jobs. Many expect a hike Wednesday. The CME FedWatch tool showed an overwhelming lean toward a raise, with the odds cited at 86.5%, then 88%.
Most of the committee leans hawkish. Logan, Cook, Barr, Hammack, and Kashkari have been calling for a hike. Warsh, new in the role, is trying to build credibility. There may be some dissenters wanting to hold off, but not hiking would be hard.
The Case Against Hiking
AI is driving GDP and a huge share of this year's growth. Without AI accelerating alongside job gains and data center building, the economy is no longer fast, and then maybe no hike is needed.
Christopher Waller asked last week why anyone would hike rates into a deflationary economy. The five-year path of core year-over-year CPI backs the point:
- 2021: 4.9%
- 2022: peaked at 6.6%, a 40-year high driven by post-Covid shortages, then eased to 6.0% by year-end
- 2023: disinflation begins, breaks down to 3.9%
- 2024: slows on shelter, ends at 3.4% to 3.2%
- 2025-2026: keeps decelerating; Friday's report showed 2.4%, a five-year low
With core CPI falling like that, there is little reason to risk slowing the economy. I can easily make the case for not raising the Fed funds rate, given the shocks in play. Warsh said early on that Wall Street has done well while Main Street has suffered. Raising rates hits housing, the consumer, and small business, which is what he seems to want to avoid. Either way, he has to explain his decision to markets.
Mortgage rates are back above 7%, which keeps housing unaffordable for many.
