AI safety spurs shift to J&J, Costco, CrowdStrike

Investors rotated out of AI infrastructure names on Monday and bought shares in defensive and cybersecurity companies after Anthropic CEO Dario Amodei urged the industry over the weekend to slow AI model development.

The S&P 500 and Nasdaq recovered from steep early losses as Treasury yields eased after briefly topping 5 percent. Traders entered the week pricing a likely Federal Reserve rate increase at the central bank’s two-day meeting that begins Tuesday; the CME FedWatch tool showed odds above 92 percent. No major U.S. economic reports were due before the Fed’s decision on Wednesday.

Blue-chip defensive stocks led gains. Johnson & Johnson and Eli Lilly rose in the pharmaceutical sector, and Kimberly-Clark and Costco advanced in consumer staples, with Costco recording a notable early-week jump. Investors favored those stocks because their earnings depend less on the capital spending cycle that supported this year’s AI trade.

Cybersecurity firms and major cloud providers also rallied. CrowdStrike and Palo Alto Networks each jumped about 14 percent, reflecting expectations of increased demand for security services amid AI safety concerns. Meta Platforms, Alphabet and Microsoft advanced as traders weighed that a slower AI rollout could reduce near-term pressure to expand capital budgets.

Futures were affected late Sunday as the AI-safety debate reached markets. Market participants noted that model development has been constrained by limited hardware and data-center capacity, and a temporary pause could allow capacity to catch up with demand. Amazon’s shares were held back by its large retail business despite potential gains for its cloud unit.

West Texas Intermediate crude pared earlier gains but settled above $100 a barrel. An afternoon reversal in the bond market limited earlier losses in stocks. The Federal Reserve’s policy statement and economic projections on Wednesday could change the outlook for defensive and AI-linked companies.