Nasdaq Plummets as Investors Fear a Democratic Victory in the Midterm Elections Will Put a Damper on the AI Boom
The Nasdaq tech index recorded its biggest one-day drop on Thursday since “Liberation Day” in April 2025, wiping out trillions of dollars in market value amid fears of stricter regulation in the artificial intelligence (AI) sector and data centers, following the Democrats’ sweeping victory in the U.S. midterm elections.
The Nasdaq Composite Index fell 5.5%, as investors fear that the Democratic Party’s electoral triumph in the midterm elections could slow the expansion of artificial intelligence infrastructure and cut funding for smaller AI companies, Reuters reports.
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
It was the second consecutive day of sell-offs in AI stocks and the fifth time since mid-October that the Nasdaq Composite Index has fallen by more than 500 points, as investor interest in AI—which had previously been sky-high—is coming under increasing scrutiny.
““The most significant outcome of the elections—especially following the Democrats’ victories in many gubernatorial races—is that the slowdown in data center construction will be the dominant issue on the market’s mind,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
Many analysts estimated that the magnitude of the losses foreshadows further sell-offs, likely beginning with Friday’s trading sessions in Asian markets.
Some analysts wondered whether the scale of the stock market crash could affect the timeline for Anthropic’s highly anticipated initial public offering, expected thisthis fall. A potential postponement could further worsen market sentiment.
From Boom to Bust
Analysts and portfolio managers noted that losses in sectors that until recently attracted strong investor interest, such as semiconductors and artificial intelligence infrastructure, come as no great surprise. This is due both to the large gains many stocks had previously recorded and to concerns about the financing of so-called “neocloud” companies, such as Nebius and CoreWeave, which have intensified following the rise in U.S. interest rates in late summer.
Shares of chipmakers and neocloud companies posted the biggest losses on Thursday, reflecting concerns that data center construction projects worth billions of dollars may be delayed.
The VIX index, known as Wall Street’s “fear index,” which tracks expectations for price volatility, posted its biggest gain since December 2024.
Tech giants that provide cloud computing services (hyperscalers), which had weathered Wednesday’s sell-off, also posted losses. Shares of Amazon and Alphabet each fell 2.2%.
The Nasdaq 100 index, which includes the largest companies on the broader Nasdaq, fell 6.4%, wiping out $2.5 trillion in market capitalization.
The Nasdaq Composite is now in a correction phase, having lost nearly 12% of its value from its all-time high at the close on October 6. A correction is defined as a 10% decline from a recent high.
The sell-offs suggest that investors are beginning to factor in the growing backlash from local communities against the construction of new AI data centers, Some analysts believe that the markets have not yet fully priced in the costs these facilities entail for American communities.
“There will be strong opposition to the installation of these data centers near residential areas, as they place a strain on the power grid and water supply systems,” said Bruce Zaro, CEO of Granite Wealth Management in Plymouth, Massachusetts.
“Although several data centers have already received approval, many others still need permits. Securing these permits will be a difficult task in the near future.”
Approximately 30% of the projected increase in U.S. data center capacity by 2028 could be jeopardized by potential construction delays, according to estimates by UBS analysts. This poses a significant threat to an industry whose growth depends on the rapid construction of new facilities.
Political uncertainty is hurting the artificial intelligence investment sector, which is already facing challenges, due to concerns about the return on the massive amounts of capital invested in the technology.
Source: in.gr
