AI stocks plunge as Democratic midterm sweep clouds data centre plans

US technology and AI-related shares fell sharply on Thursday, dragging Wall Street lower, as investors weighed how Democrats' sweeping midterm election victories could reshape the artificial intelligence industry.

The tech-heavy Nasdaq was down 4.8 percent in midday trading. The S&P 500 fell 3.6 percent and the Dow Jones Industrial Average slid 2.8 percent. The declines followed a rally on Wednesday, when markets welcomed the election outcome and President Donald Trump's remarks that he would accept the results.

AI stocks, which have driven much of the market's growth, led the selloff. Of 45 data centre ballot initiatives across the country, voters backed restrictions on most. According to Data Centers on the Ballot, 39 measures to restrict AI succeeded, while only 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, Reuters reported.

"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 slumped. CoreWeave fell more than 12 percent and Nebius Group nearly 17 percent. Semiconductor stocks also dropped: Nvidia, the AI market leader, fell 8.2 percent; Micron nearly 14 percent; and Intel 6.8 percent. AI server maker Dell dropped nearly 13 percent.

Other tech giants were in negative territory, with Amazon down 2 percent and Meta, the parent of Facebook and Instagram, down 3.8 percent.

Musk's election bets

SpaceX shares fell 9.5 percent and Tesla dropped more than 11 percent. Both companies are headquartered in Texas, where owner Elon Musk bet against Democratic candidates who won. Musk spent $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.

Safe havens

Gold prices hit a two-week high, with spot gold jumping just over one percent to $4,115 per ounce. Technology stocks also pulled the European benchmark index lower, 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.

Source: Al Jazeera.