Tech and AI stocks plunge as Nasdaq loses $2.5tn after election-driven regulatory fears

Shares in major technology and artificial intelligence companies fell sharply on Thursday, deepening a market rout that wiped an estimated $2.5tn from the Nasdaq Composite. The selloff came as investors reacted to Democratic wins in key data-centre states and the prospect of tougher regulation on data centres and AI infrastructure. The losses also dragged down other major US indexes, with the S&P 500 and Dow Jones Industrial Average both closing lower.

Nvidia fell more than 9%, while AMD and Micron each dropped by more than 17%. Intel was down 10.3%, and SanDisk plunged by more than 22%, underscoring how heavily exposed chipmakers and semiconductor firms were to the selloff. The Philadelphia Semiconductor Index fell by more than 12%, while Tesla and SpaceX also lost ground, falling nearly 11% and 8% respectively.

The political backdrop has become central to the market reaction because data centres are a key part of AI expansion, but they also face opposition over land use, power demand and construction. Campaigns in several states had focused on slowing data-centre growth, and there were dozens of ballot measures aimed at restricting the development of the hubs that power the technology. Texas governor-elect Gina Hinojosa campaigned against new data-centre construction and pledged a moratorium, adding to investor concern about the regulatory outlook.

The scale of the losses highlights how closely markets are now tied to expectations for AI spending and policy. Technology leaders had already been under pressure to explain the benefits of data centres more clearly to communities, and the election results appear to have intensified scrutiny of the sector. The rout also showed how quickly political developments can affect valuations in companies that have been among the biggest beneficiaries of the AI boom.

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The selloff intersected with Elon Musk's political spending, after he backed Republican campaigns with nearly $450m, including at least $45m in support of Ken Paxton for the Texas senate seat. Texas was among the states that shifted to the Democrats, adding to the sense among investors that the regulatory environment may be changing more quickly than expected. Market watchers said the Nasdaq's fall was large enough to push it into correction territory, a sign of how broad the pressure had become.

What remains unclear is how long the selloff will last and whether the election results will translate into concrete restrictions on AI infrastructure. Investors will be watching for further comments from technology leaders and any policy moves from newly elected officials in states important to the sector. The next test will be whether companies can reassure markets that demand for AI infrastructure can still justify the scale of investment now under scrutiny.

Shares in SpaceX and Tesla fell sharply on Thursday as technology and artificial intelligence stocks came under pressure after Democrats swept to victory in the midterms. The selloff also dragged down major US stock indexes, with the Nasdaq Composite falling by more than 5% at one point in early trading. Investors appeared to be reacting to the prospect of tougher scrutiny of data centre construction and the wider AI industry after the election results.

SpaceX shares were down more than 9% by lunchtime, while Tesla shares dropped more than 11%. Among chipmakers, AMD fell more than 14%, Intel was down by more than 7%, and Nvidia lost nearly 9%. Micron shares fell by as much as 17% before recovering slightly, and the Philadelphia Semiconductor Index dropped by 10%.

The broader market reaction also hit the S&P 500, which was down 3.8% by lunchtime. The losses were described by one investment strategist as sending shockwaves into other markets, with concerns that heavy spending on AI infrastructure may not deliver the returns investors had expected. The selloff came a day after the Democrats won in key data centre states, including Texas, which had been seen as important for the sector.

The political backdrop matters because data centres have become central to the expansion of AI, but they also face local opposition over land use, power demand and construction. After the election, some technology leaders acknowledged they need to improve how they explain the benefits of AI and data centres to communities. OpenAI president and co-founder Greg Brockman said the reaction to data centres had surprised many people and that more work was needed to ensure communities were on board.

The market reaction also intersected with Elon Musk's political spending. He had backed Republican campaigns with nearly $450m, including at least $45m in support of Ken Paxton for the Texas senate seat, but Texas was among the states that turned blue in the Democratic sweep. Texas governor-elect Gina Hinojosa campaigned against data centres and pledged a moratorium on new construction in the sector, adding to investor concern about the regulatory outlook.

What remains unclear is how long the selloff will last and whether the political shift will translate into concrete restrictions on AI infrastructure. Investors will be watching for further comments from technology leaders, as well as any policy moves from newly elected officials in states that are important to the sector. The next test will be whether companies can reassure markets that demand for AI infrastructure can still justify the scale of investment now under scrutiny.

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