Nasdaq plunges into correction territory as midterm results raise fresh questions about AI boom
Investors sold AI-linked shares as fears grew that Democratic victories could slow data center construction and cut expected returns on spending.
- On Thursday, November 5, the Nasdaq Composite plunged into correction territory, falling over 10% from its October 6 peak as investors sold stocks tied to artificial intelligence and data center infrastructure following the U.S. midterm elections.
- Democratic victories in the recent midterm elections fueled investor fears of tighter AI regulation and potential data center construction pauses. Political shifts in Texas and Georgia, accounting for roughly 40% of planned U.S. data center capacity, created headwinds for an industry reliant on rapid facility expansion.
- Heavyweights like Nvidia and Advanced Micro Devices tumbled as a tech-led rout erased roughly $1.8 trillion in market value. Goldman Sachs reported that large hedge funds liquidated hyperscaler positions to manage exposure during the selloff.
- While marketing platform AppLovin reported strong profits, the broader sell-off deepened as investors questioned the sustainability of massive AI spending. JPMorgan analysts noted the boom may become costlier and more consolidated in coming years.
- Investors await the October employment report, scheduled for release Friday, November 6, to gauge economic resilience amid the selloff. The data may determine whether AI-related selling stabilizes or if broader concerns extend pressure on markets in coming weeks.
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The latest tech crash has seriously shaken the euphoria surrounding artificial intelligence for the first time. At the same time, the large corporations continue to invest in billions of euros. Now it becomes clear who can carry this bet – and in which shares the risks are growing dangerously.
The Nasdaq technology index on Wall Street has partially recovered from yesterday's heavy losses. Investors took advantage of the lower share prices to buy shares again, particularly of chip companies. These had been punished severely out of fear that a Democratic majority in the US Congress could lead to stricter regulations for artificial intelligence and delays in the construction of AI data centers.
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