AI stocks plunge after election, driving down US markets | Financial Markets News
Tech Stocks Lead Market Decline as Investors Assess Midterm Election Impact on AI Industry
U.S. markets experienced significant losses on Thursday, largely driven by declines in technology stocks, particularly those linked to semiconductor and data center sectors, following the Democrats’ strong performance in the midterm elections.
The Nasdaq Composite fell 4.8 percent in midday trading, while the S&P 500 dropped 3.6 percent, and the Dow Jones Industrial Average declined by 2.8 percent.
On Wednesday, markets had rallied after the election results indicated a reduction in potential policy disruptions resulting from a divided Congress. Investors were further reassured by President Donald Trump’s statement affirming his acceptance of the election outcomes.
Stocks in the artificial intelligence (AI) sector, which have been pivotal to recent market growth, led the downward trend in technology shares on Thursday.
Voter initiatives across the country predominantly favored restrictions on data centers, with 39 of 45 measures aimed at regulating AI receiving public support. Only one measure in North Dakota rejected such restrictions.
UBS analysts have indicated that these regulatory hurdles could jeopardize approximately 30 percent of planned U.S. data center capacity expansions expected by 2028, as reported by Reuters.
Michael Monaghan, a portfolio manager for Founders 100 ETF, commented on the situation, stating, “Yesterday, markets rallied on certainty as election results removed a layer of uncertainty. Today, portfolio managers and analysts are digging into the implications and adjusting expectations for potential political resistance to AI infrastructure, particularly at the state and local levels.” He noted that this concern is evident in the sell-off among semiconductor companies and hyperscalers.
Data center operators and cloud firms faced significant declines, with CoreWeave falling over 12 percent and Nebius Group down nearly 17 percent. Major semiconductor stocks also saw declines; Nvidia fell by 8.2 percent, Micron by nearly 14 percent, and Intel by 6.8 percent during midday trading. Dell, a manufacturer of AI servers, also dropped nearly 13 percent.
Additional tech giants posted losses, including Amazon, which fell 2 percent, and Meta Platforms, the parent company of Facebook and Instagram, which declined 3.8 percent.
SpaceX shares dropped 9.5 percent, while Tesla, owned by Elon Musk, experienced an 11 percent decline, following his substantial midterm election spending. In Texas, where both companies are based, Musk financially supported several candidates, including $230 million against Senate candidate James Talarico and $5 million in opposition to Gina Hinojosa’s bid for governor. His investments did not yield the desired results as the Democratic candidates he opposed emerged victorious.
Dan Ives, managing partner at Yorkville Ives, expressed concerns about regulatory challenges ahead for a potential SpaceX-Tesla merger, stating, “Now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas.”
In contrast to technology stocks, gold prices reached a two-week high on Thursday. Spot gold prices, often sought after during periods of economic uncertainty, increased just over 1 percent to $4,115 per ounce.
European stock markets also declined, influenced by the downward trend in technology shares as investors evaluated the implications of the Democratic sweep in the U.S. midterm elections. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, noted, “It’s really a story of a rotation happening from technology to non-technology and from the U.S. to non-U.S. markets as a result of the midterm elections and the very aggressive Democratic sweep.”
