Global stocks tumble as Democratic midterm wins spark AI selloff

Global stock markets fell sharply on Friday, after this week's US midterm elections, as investors worried that Democratic gains in Congress could slow the artificial intelligence investment boom that has driven share prices higher.

More than $3.2tn was wiped off the US stock market on Thursday, according to Financial Times calculations based on FactSet data, the biggest drop in market value on the S&P Composite 1500 index since the turn of the millennium. The Nasdaq tech index fell 5.5%, the Dow Jones Industrial Average lost 1,833.06 points, or 3.44%, and the S&P 500 dropped 4.36%.

The selloff spread across Asia-Pacific. Japan's Nikkei slumped almost 6% and ended the week down 9.3% — its worst weekly decline since March 2020. South Korea's KOSPI fell 6.7%, reaching its lowest level since early April and triggering a 20-minute circuit breaker. Taiwan's TAIEX closed down 1,791 points, or 4.6%, after plunging a record 3,737.67 points in early trading; the index had been up more than 50% for the year earlier this week.

Chip makers led the US declines. SanDisk fell 22%, while Micron and AMD each lost 17% of their value. Nvidia, the chip giant, dropped more than 9%, leading fallers on the Dow.

Policy uncertainty and slowing AI spending

Analysts pointed to policy uncertainty, noting that Democrats are more critical of data centres — a stance that could slow the rollout of AI investment, especially given public opposition to the sector.

Christopher Forbes, head of Asia and Middle East at CMC Markets, called the market action "a bit of a disaster". He said clients faced margin calls all night and all day, and described the move as "a whole policy and six-year structural shift that says we're now going to pause, we're now going to cool AI, we're now going to cool data centres, approvals and equity capital markets."

Kyle Rodda, senior financial market analyst at Capital.com, called it a "brutal sell-off", saying the tumble resumed as investors contemplated what a Democrat-controlled Congress may mean for tech regulation and the AI boom.

The political risk arrived when the AI trade was already under strain: earnings season has disappointed, with Magnificent Seven results undershooting growth expectations.

Trump blames Democrats

President Donald Trump blamed the Democratic Party for the falls. "The Stock Market suffered one of the Worst Days in History based on the results of the Election," he wrote on Truth Social, adding: "Remember, it wasn't Republicans, it was Dumocrats." In a later post he told voters: "you only have yourselves to blame!"

UK house prices fall

Separately, UK house prices fell unexpectedly in October, data from Lloyds bank showed. Prices dropped 0.6% month-on-month and were 1.2% lower than a year earlier — the biggest annual fall since October 2023. A Reuters poll of economists had forecast a 0.1% monthly rise and a 0.3% annual fall. The average property price fell to £296,285 from £298,167 in September.

Andrew Asaam, mortgages director at Lloyds, said housing demand was "being tested by a challenging economic backdrop", with renewed inflationary pressures keeping borrowing costs high.

European markets were expected to open lower, with the UK's FTSE 100 and Germany's DAX each called down more than 1%. Investors are awaiting the US non-farm payrolls report at 1.30pm GMT and the University of Michigan consumer confidence reading at 3pm GMT.

Source: The Guardian Business.