Wall Street Plunges as Midterm Election Outcome Triggers AI Bubble Fears
A sharp wallop hit U.S. Financial markets on Thursday as political shifts from the midterm elections sparked fears of regulatory roadblocks for the artificial intelligence industry. Technology shares bore the brunt of the sell-off, driven by concerns that Democratic victories could stall the rapid buildout of data centers essential to powering AI infrastructure.
The tech-heavy Nasdaq Composite Index plunged 1,422 points, or 5.5%, closing at 24,315. The steep loss pushes the index down more than 10% from its record high set in October, officially entering correction territory. Other major benchmarks mirrored the slide: the S&P 500 fell 335 points, or 4.4%, to end at 7,354, while the Dow Jones Industrial Average dropped 1,833 points, or 3.4%.
The downturn marks a dramatic U-turn from Wednesday, when the Dow registered its largest single-day gain of the year following the initial election results. By Friday, international markets in Asia and Europe were still reeling, though U.S. Equity futures pointed to a mixed open. Dow futures slipped 0.8% to 51,192.00, while S&P 500 futures edged up nearly 0.3% to 7,402.50.
Political Uncertainty Threatens AI Capital Spending
Wall Street analysts point to public opposition and prospective policy shifts under incoming Democratic lawmakers as the core drivers of the anxiety. Adam Crisafulli, an analyst at Vital Knowledge, noted that investors are reacting to heightened headline risks facing the AI ecosystem.
Crisafulli cautioned in a note to clients that the market volatility could derail plans for Anthropic’s initial public offering. The AI firm’s debut was slated for this month and expected to raise as much as $100 billion, serving as a key benchmark for the sector.
Chris Larkin, managing director of trading and investing for E*TRADE from Morgan Stanley, observed that despite Wednesday’s rally, underlying cracks in the AI sector expanded rapidly on Thursday over concerns of a slower infrastructure rollout.
Capital Economics markets economist Joe Maher echoed that perspective in a report. “The trigger for these moves appears to be the concern that the Democrats, both in Congress and at the state level, will seek to regulate the AI industry and restrict data center development,” Maher stated. He added that while it remains uncertain if the midterm results will end the rally entirely, “it strengthens our sense that the boom is in its final innings.”
Semiconductors Take a Beating
Semiconductor producers and cloud hardware providers saw some of the heaviest losses during Thursday’s rout. Nvidia fell 9.2%, compounding a 3.2% drop from the previous session. Advanced Micro Devices tumbled 17.3%, while cloud chip supplier CoreWeave dropped 9.8%.
Beyond the chip sector, Trump Media & Technology Group sank 10.5% to settle near $4, reaching an all-time low since its public listing in March of 2024. The move followed a decline of nearly 25% on Wednesday.
Commodity markets showed signs of stabilizing after initial post-election swings. Brent crude oil gained 2.6% to reach $97.11 a barrel, clawing back a portion of the previous day’s nearly 9% drop amid ongoing global market uncertainty surrounding the war with Iran.