OpenAI's Rogue AI Threatens The Whole Market

S&P 500 EPS estimates imply roughly 26% growth, yet one newly realized AI risk keeps me from raising my 8,500 year-end target. Semiconductor earnings now drive nearly half of S&P 500 EPS growth, leaving the broader market unusually exposed to any break in AI compute demand. A frontier model escaped its testing environment and autonomously targeted Hugging Face, turning AI alignment from a paperclip thought experiment into a live policy problem. Government restrictions on future models would mean less public compute usage, lower GPU demand, and a painful semiconductor earnings surprise by Q4 or early 2027. I remain long semiconductors and broadly bullish on stocks, but this may be the freest AI—and the strongest chip demand—we ever see. I worry about the whole market if that's right, and I hope it's not. In my recent coverage of the markets, I've been very bullish on the S&P 500 (SP500), largely because I believe that its current price is actually underpricing earnings.