London-listed technology trusts beat a retreat today on fears the breakneck speed of development in artificial intelligence could be halted with growth stocks further challenged by the prospect of the US central bank starting to raise interest rates this week.
Manchester & London (MNL) fell 5%, or 50p, to 940p, Polar Capital Technology (PCT) slid 2.9%, or 19p, to 634p and Allianz Technology Trust (ATT) slipped 2%, or 14p, to 694p after the chief executives of OpenAI, Anthropic and xAI expressed safety concerns over the rapid deployment of AI.
In what appeared to be a co-ordinated weekend call for global regulation by AI developers, Anthropic boss Dario Amodei published a plan for independent monitoring of AI models as they are developed.
His intervention followed a warning from Jacob Coxon, an AI researcher who quit Anthropic. He said that staff at the company backed by three Baillie Gifford investment trusts, including Scottish Mortgage (SMT), as well as RIT Capital Partners (RCP) and Pantheon International (PIN), were “genuinely frightened” for the future of humanity.
Sam Altman and Elon Musk, the bosses of OpenAI and xAI, agreed with Amodei that the pace of development needed to be slowed down. Altman said it would not proceed with a flotation this year believing it would be “ill advised”.
Global AI and semi conductor stocks, which have surged in response to AI spending, fell in response. In Europe, Germany’s Infineon dropped 6.3%, Dutch chip equipment makers ASML and ASM International shed 5.7% and 8.1% respectively.
Earlier in Asia, South Korea’s Kospi index gave up 3.3% as chip makers SK Square and SK Hynix tumbled 8%.
On Wall Street this afternoon, US chip giants Nvidia fell 3.6% to take its decline to 6.5% over one month, though up 12.9% this year. Broadcom dropped 4.4%, leaving it down 11.9% over one month and flat year to date.
Richard Hunter, head of markets at Interactive Investor, said the intervention worried investors because it “brings into questions whether the tsunami of investment may be starting to peak”.
Russ Mould, investment director at AJ Bell, said tech shares were also under pressure as the conflict in the Middle East pushed the price of Brent crude oil up another 1% to $108.59 a barrel, adding to fears about rising US inflation.
“Markets now expect an 87% chance of a US rate hike this week and a 49% probability of another one in December,” said Mould, adding that higher rates put pressure on valuations of growth companies depending on future profits. The US Federal Reserve has held its funds rate at 3.5% to 3.75% since last December when it cut the range by 25 basis points or quarter of a percentage point.
“Previously a hot investment area with investors clambering to own any stock linked to the AI boom, now it looks like AI’s strengths could backfire. There are growing fears that AI is advancing at an extraordinary pace and there needs to be greater safeguards and controls in place,” he said.
Today’s wobble barely dents the long-term returns the three tech trusts have enjoyed. With its shares standing 24% below net asset value, the £376m MNL is off 6.9% over one month, but up 19.7% this year and has generated a total shareholder return of 106% over five years.
PCT, the £7.2bn sector giant whose shares are on a 9% discount, has slid 6.4% over a month but is up 36.5% this year and has made a handsome 157% for shareholders over five years.
ATT, a £2.3bn trust on a 7% discount, is down 5.5% over one month, but up 31.7% this year, with shareholders seeing a total five-year return of 131%.
Herald (HRI), the £551m global investor in smaller tech stocks, eased just 0.7% to £28.65 today. On a 13% discount, its shares have shed 5% in the past month but provided an impressive 269% total return to shareholders over 10 years.
