Shares tied to artificial intelligence sank on Thursday, dragging US stock markets lower after Democrats won widely in the midterm elections. Losses in chip makers and companies linked to data centres put heavy pressure on the technology sector.
At midday, the tech-heavy Nasdaq was down 4.8 percent, the S&P 500 had fallen 3.6 percent and the Dow Jones Industrial Average had slipped 2.8 percent. The decline followed a rally on Wednesday, when investors welcomed Democratic gains that were seen as limiting policy shocks from a Congress at odds with the White House. Markets were also reassured by President Donald Trump’s remarks that he would accept the election results.
Chip makers and data centre operators lead the selloff
AI stocks, which have accounted for much of the market’s growth, drove the drop in technology shares. Data centre operators and neocloud companies also slumped, with CoreWeave falling more than 12 percent and Nebius Group down nearly 17 percent.
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Among semiconductor stocks, Nvidia, described as the leader in the AI market, lost 8.2 percent. Micron fell nearly 14 percent and Intel dropped 6.8 percent in midday trading. Dell, an AI server manufacturer, slid nearly 13 percent.
Other large technology firms were also in negative territory. Amazon fell 2 percent, while Meta, the parent company of Facebook and Instagram, was down 3.8 percent. SpaceX shares dropped 9.5 percent, and Tesla, also owned by billionaire Elon Musk, lost more than 11 percent.
Voters back limits on data centres and AI infrastructure
Of the 45 data centre ballot initiatives held across the country, voters backed restrictions on most of them. According to Data Centers on the Ballot, 39 measures to restrict AI succeeded, and only one, in North Dakota, voted against restrictions.
UBS analysts estimated that potential construction pauses could put roughly 30 percent of planned US data centre capacity additions in 2028 at risk. The concern has weighed on investors trying to judge how political resistance could affect the sector.
Michael Monaghan, portfolio manager of the Founders 100 ETF, said “Yesterday, markets rallied on certainty as election results removed a layer of uncertainty.” He added that managers and analysts were now assessing possible political resistance to AI infrastructure, particularly at the state and local levels. “We’re seeing that concern reflected in the selloff across semiconductors and hyperscalers,” he said.
Musk’s election spending and wider market moves
Musk’s midterm spending, which came close to half a billion dollars, drew attention as his companies fell. In Texas, where both SpaceX and Tesla are headquartered, he backed positions opposed by Democratic candidates who ultimately won. He spent $230m to defeat US Senate candidate James Talarico, $5m to back the opponent of Gina Hinojosa in the governor’s race and $500,000 in the lieutenant governor’s race, which Democrat Vikki Goodwin won.
Dan Ives, managing partner of Yorkville Ives, said in a note on Thursday that a SpaceX and Tesla merger could still happen, but it would now face a much tougher regulatory path to be completed in 2027 given the new political landscape in Washington and Texas.
Gold prices hit a two-week high on Thursday. Spot gold, usually considered a safe investment in times of economic uncertainty, rose just over one percent to $4,115 per ounce. European technology stocks also pulled the regional benchmark index lower as investors weighed the sector’s outlook.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said “It’s really a story of a rotation happening from technology to non-technology and from the US to non-US markets as a result of the midterm elections and the very aggressive Democratic sweep.”
