Nasdaq Drops 5.5% After Democrats Win Midterms on AI Fears, Chipmakers Rebound Friday
The Nasdaq fell more than 5.5% Thursday, losing an estimated $2.5 trillion, as Democrats' midterm wins sparked fears of AI and data-center regulation. Chipmakers rebounded Friday.
US tech stocks lost an estimated $2.5 trillion Thursday as the Nasdaq closed down more than 5.5%, after Democrats won the US midterm elections and gained control of both the Senate and the House. Several Democratic candidates campaigned on new rules for artificial intelligence and data centers, and investors priced in a tougher environment for the AI build-out.
Businesses tied to AI development took the heaviest losses, particularly chipmakers and semiconductor firms. AMD and Micron both dropped by more than 17% on Thursday. The Philadelphia Semiconductor Index, which tracks 30 of the largest semiconductor companies, fell by more than 12%.
When US markets reopened Friday, many of the biggest losers showed signs of recovery. Nvidia rose more than 7% in early trading, SpaceX gained 6.19% and Tesla added 3.38%, though none had fully recovered Thursday's losses. AMD shares rose about 12% and Micron gained more than 8%. Apple and Microsoft were marginally lower.
The Nasdaq was up 1.33% in early Friday trading, the S&P 500 edged up 0.4% and the Dow Jones slipped 0.87%. The losses were not confined to the US: Japan's Nikkei 225 fell 6.3% and South Korea's Kospi plunged more than 8% at one point, triggering a circuit breaker that temporarily halted trading.
The political backdrop shifted sharply. According to the BBC, a range of winning Democrats defined themselves against AI in general, not just individual data-center projects. Russ Shaw, founder of Tech London Advocates, told the BBC that big tech companies now have to make a much better case for AI because it has become a significant political liability.
Katy Kaminski, chief strategist at AlphaSimplex, told the BBC that investors are no longer simply riding the AI trade and are instead trying to determine which companies will actually be profitable at their current valuations.
The sell-off also drew a response from President Donald Trump, who wrote on Truth Social that he is "100% in favor of Super Intelligence" and that only "foolish leadership" would say no to the riches AI brings.
The same day, the Bureau of Labor Statistics reported that US employers added 165,000 jobs in October, more than double what analysts had expected, with unemployment easing slightly to 4.1% from 4.2% in September. The jobs data added to interest-rate concerns but did not reverse the tech rebound.
In delayed trading, Nvidia was at $186.64, up 2.78%; AMD at $449.04, up 11.04%; Micron at $690.00, up 5.12%; Tesla at $358.22, up 4.23%; Apple at $342.37, down 0.52%; and Microsoft at $530.61, down 0.99%.
What happens next depends on whether Democrats follow through on AI and data-center legislation, and on earnings reports from several technology companies due in the coming week.