Nasdaq Records Largest Decline in 18 Months Amid AI Concerns Post-Democrat Victory
The Nasdaq index experienced a significant downturn on Thursday, marking its worst performance in a year and a half. The index plummeted by 5.5%, reacting to increasing concerns about potential regulatory constraints on the artificial intelligence (AI) sector, largely influenced by the recent midterm elections.
With Wall Street facing widespread declines, the Nasdaq composite slid into “correction territory,” dropping over 10% from its most recent peak and culminating in a staggering loss of more than $2 trillion in market value by the close of trading. This decline represents the index’s steepest drop since the announcement of tariffs by former President Donald Trump in April 2025.
Investor anxiety surrounding extensive AI spending permeated the market, causing ripples across global exchanges as traders braced for stricter oversight of datacentre expansions. Semiconductor stocks bore the brunt of the fallout, with SanDisk tumbling by 22% and Western Digital declining by 17%.
The market volatility was underscored by the VIX, Wall Street’s “fear index,” which surged by 61% to reach levels not seen since the early days of the Iran war.
Analysts attributed this downturn to expectations that a Democratic majority may lead to increased restrictions on datacentre development, following recent election victories. Multiple local ballots also saw voters opposing the establishment of new datacentres.
Investor strategist Neil Wilson from Saxo UK described the situation as a “complete capitulation-level event” for technology stocks. He noted that while the reaction may seem excessive, the prevailing market sentiment is one of “sell everything” until a degree of stability is restored.
The Dow Jones industrial average fell over 1,800 points, a decrease of 3.4%, closing at 51,868 points, while the S&P 500 also saw a significant drop of 4.3%.
Nvidia, a major player in the AI sector, led the decline in the DJIA with a notable decrease of 9.2%, followed closely by Goldman Sachs, which fell by 3.7%. An initial rally in European markets fizzled late in the trading session, with the FTSE 100 in the UK closing down by 46 points, or 0.4%, at 10,782.66.
This sharp decline follows a rally on Wednesday, when Wall Street enjoyed its largest daily gain in months as investors expected the Democratic party’s success in the midterm elections to temper executive power. This optimism prompted Trump to celebrate the stock market’s previous highs during his administration.
Tech analyst Dan Ives cautioned that the midterm results are indicative of an inevitable slowdown in datacentre construction. He remarked, “The market’s moving from the promise of AI to the price of AI,” emphasizing that while AI promises transformative potential, not every AI-related stock is currently valued accurately.
Editor’s Take
This downturn signifies significant implications for the tech and AI sectors. Increased regulatory scrutiny could hinder innovation and datacentre expansion vital for AI development. Investors may need to reassess their strategies amid this volatility, potentially leading to a more cautious market outlook in the near future.
Source: www.theguardian.com
