AI stocks plunge after election, driving down US markets

United States markets slid on Thursday, with losses in US chip and data centre-related stocks fuelling pressure on the technology sector following Democrats’ sweeping midterm election wins.

The tech-heavy Nasdaq was down 4.8 percent in midday trading, while the S&P 500 fell 3.6 and the Dow Jones Industrial Average slid 2.8 percent.

US markets jumped on Wednesday following the midterm election, with Democrats’ sweeping wins signalling limits on policy shocks from a Congress at odds with the White House. Markets were also reassured by US President Donald Trump’s remarks that he would accept the election results.

Artificial intelligence (AI) stocks – which have driven much of the market’s growth – led the plunge in the tech sector that drove down markets on Thursday.

Of the 45 data centre ballot initiatives around the country, voters backed restrictions on most of them. According to Data Centers on the Ballot, 39 ballot measures to restrict AI were successful, while 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, according to the Reuters news agency.

“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 Founders 100 ETF, told Al Jazeera.

“We’re seeing that concern reflected in the selloff across semiconductors and hyperscalers.”

Data centre operators and neocloud companies were slumping, with CoreWeave down over 12 percent and Nebius Group down nearly 17 percent. Semiconductor stocks such as AI market leader Nvidia fell by 8.2 percent, Micron by nearly 14 percent and Intel by 6.8 percent in midday trading.

AI server manufacturer Dell dropped nearly 13 percent.

Other tech giants were also in negative territory, with Amazon falling 2 percent and Facebook and Instagram’s parent company, Meta, down 3.8 percent.

SpaceX also took a big hit, with shares down 9.5 percent, while Tesla, also owned by billionaire Elon Musk, fell over 11 percent, following Musk’s nearly half-billion-dollar midterm election spending spree.

In Texas, where both companies are headquartered, Musk bet against Democratic candidates who ended up winning their races. Musk shelled out $230m to defeat US Senate candidate James Talarico, $5m to back Gina Hinojosa’s opponent in the governor’s race and $500,000 in the lieutenant governor’s race, which Democrat Vikki Goodwin won.

“We will believe a SpaceX/Tesla merger happens but now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas,” Dan Ives, managing partner of Yorkville Ives, said in a note on Thursday.

Gold prices hit a two-week high on Thursday. Spot gold, which is usually considered a safe investment in times of economic uncertainty, jumped just over one percent to $4,115 per ounce.

Technology stocks also pulled the European benchmark stock index lower on Thursday as investors ⁠assessed the outlook for the sector following a Democratic sweep in the US midterm elections, Reuters reported.

“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,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.