AI-related stocks tumble as US markets react to Democratic midterm victories
US equity indices fell on Thursday, led by sharp declines in AI, semiconductor and data-centre stocks after Democrats won a majority in the midterm elections.
U.S. markets slipped on Thursday, with the Nasdaq down 4.8%, the S&P 500 falling 3.6% and the Dow Jones Industrial Average sliding 2.8% in midday trading. The decline was driven by a sell-off in AI-related shares after Democrats secured sweeping wins in the midterm elections, prompting concerns about future state and local restrictions on AI infrastructure.
Data-centre ballot measures saw 39 of 45 initiatives to limit AI approved by voters, according to Data Centers on the Ballot, while only one measure in North Dakota was rejected. UBS analysts warned that construction delays could jeopardise about 30% of planned U.S. data-centre capacity additions by 2028.
"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," Michael Monaghan, portfolio manager of the Founders 100 ETF, told Al Jazeera.
"We’re seeing that concern reflected in the selloff across semiconductors and hyperscalers," he added.
Shares of data-centre operators and neocloud firms fell sharply, with CoreWeave down more than 12% and Nebius Group nearly 17%. Leading semiconductor companies also dropped: Nvidia slid 8.2%, Micron fell almost 14% and Intel declined 6.8%. AI server maker Dell lost nearly 13%.
Other technology giants posted losses, including Amazon (-2%), Meta (-3.8%), SpaceX (-9.5%) and Tesla (-11%). Dan Ives, managing partner of Yorkville Ives, noted that a potential SpaceX/Tesla merger would now face a tougher regulatory path in light of the new political landscape.
Gold prices rose, with spot gold gaining just over 1% to $4,115 per ounce, marking a two-week high. European markets also slipped as investors reassessed technology exposure after the Democratic sweep.
"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," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.