AI Slowdown Fears Rattle Markets as Data Center REITs, Semiconductor Stocks Slide

A growing chorus of concern over the pace of artificial intelligence development sent AI-linked stocks lower Monday, pressuring semiconductor shares and data center real estate investment trusts, even as some industry executives and the White House pushed back on what they characterized as alarmist rhetoric.

The Nasdaq Composite lost just over half of a percentage point in Monday's session after technology stocks clawed back from being down 1% earlier in the day. Shares of AI-linked companies including Micron and Nvidia declined on industry fears, while rallies in cybersecurity stocks provided a partial cushion.

Semiconductor shares entered the session already under pressure — down roughly 20% from their June highs — before sliding an additional 4% on Monday. The tech sector of the S&P 500 has seen its forward price-to-earnings multiple contract from 29 to 21 over the past year, as investors have grown unwilling to extrapolate profit growth without a clear path to free cash flow.

President Donald Trump moved aggressively to counter the narrative. In a series of social media posts Monday, Trump called the pushback against AI and data centers a "hoax" and a "scam," taking a swipe at Anthropic CEO Dario Amodei in the process. Trump attributed the backlash to the United States leading other countries in AI development "by a lot." He also called Nvidia CEO Jensen Huang directly as Huang was speaking at a summit, reiterating his view that the concerns are unfounded.

Meanwhile, Microsoft posted a provisional code of conduct that would place restrictions on its future AI models, a move that followed calls from Anthropic and OpenAI — both of whose models are incorporated into Microsoft's Copilot assistant — for a slowdown in AI advancement.

Data center REITs Digital Realty and Equinix saw their stocks slump Monday following the weekend warnings. Digital Realty CEO Andrew Power, however, pushed back on the most dire interpretations. "There's tremendous digital transformation happening that is not connected to AI," Power said in an interview with CNBC's Property Play. "There is tremendous cloud computing growth."

Power said hyperscalers have had to choose between growing their commercial cloud businesses or allocating capacity to AI labs, and argued that not all markets would be affected equally. Digital Realty's development pipeline currently totals $20 billion under construction, up from $10 billion at the end of 2023, the company said.

Andrew Batson, global head of data center research and strategy at JLL, said the real growth in data centers over the next several years lies in inference — the adoption of AI tools by businesses and consumers — rather than in model training, which would bear the brunt of any slowdown. "Only 1 in 4 Americans use AI daily, so even if models are slow to be released, there is significant runway for adoption to grow and data center demand to increase," Batson said. He also pointed to institutional commitments from Blackstone, BlackRock, and KKR as signals of continued conviction in the space.

The broader demand picture, according to a McKinsey report cited by JLL, remains substantial: AI could account for about 70% of global data center capacity demand by 2030, with the capital outlay needed to meet total demand approaching $7 trillion. The real estate portion alone could represent $3 trillion in investment over the next five years.

Bank of America CEO Brian Moynihan added to the cautious tone Monday, warning analysts that investment banking fees would likely fall by more than 10% in the third quarter compared with a year prior — a steep reversal from the 50% growth the bank reported in its second quarter. Bank of America shares tumbled just over 5% on the session.

The Federal Reserve's two-day policy meeting opened Tuesday, with an interest rate decision expected Wednesday. The 10-year Treasury yield, which briefly backed off from highs not seen in nearly three years on Monday, resumed its ascent overnight, hitting its highest level since 2007 — reinforcing the dual pressure facing risk assets as both the AI narrative and the rate environment tighten simultaneously.

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