U.S. stocks tumble as tech shares slide amid Democratic midterm sweep
The S&P 500 dropped 4.4% and the Nasdaq fell 5.5% on Thursday, driven by losses at major AI-related companies and concerns that a Democrat-controlled Congress could slow AI infrastructure spending.
U.S. equity markets reversed Wednesday's rally on Thursday, with the S&P 500 sliding nearly 4.4% and the Nasdaq Composite falling 5.5%, the steepest one-day decline for the S&P since April 2025. The sell-off was led by large technology firms tied to artificial-intelligence development; Nvidia lost 9.4%, Meta Platforms 4.2% and SpaceX 9.2%.
Analysts linked the downturn to uncertainty over how a Democratic-controlled Congress might affect the pace of AI build-out, particularly regarding electricity and water use in data centres. Dan Ives, partner at Yorkville Ives & Co., said the “blue wave” could curb AI spending, noting that he had previously expected robust investment through 2029 under a Republican-led Congress. Ives now projects that up to 10% of the 800-1,000 planned AI-focused data centres could be cancelled, with another 20% facing prolonged regulatory hurdles.
The prospect of tighter regulation in Texas also weighed on investors. Ariana Salvatore, head of public policy research at Morgan Stanley, highlighted that newly elected Governor Gina Hinojosa’s platform includes a moratorium on new data-centre approvals, raising the risk of project delays.
Beyond political factors, the market reaction reflects broader concerns about high valuations in the tech sector. A Dow Jones Market Data analysis from October showed that ten S&P 500 companies, including Meta, are expected to generate two-thirds of profit growth for the third quarter, while the so-called “Magnificent Seven” accounted for roughly 35% of the index’s market value last month.
The decline was broad-based, affecting all S&P 500 sectors and spilling over into Canada, where the S&P/TSX Composite fell 2% across most industries. Some observers, such as Ed Yardeni of Yardeni Research, suggested the slowdown could create a more sustainable “Goldilocks” environment for AI investment, tempering excesses without halting growth.