Midterm Elections Reshape AI Policy Expectations
After the US Democratic Party scored a major victory in the midterm elections, investors began to reassess the policy risks facing the rapid expansion of the AI industry. Markets fear that with Democrats gaining ground in Congress and in multiple states, AI regulation could tighten and data center construction could be restricted at the local level, slowing US AI infrastructure investment, triggering selling in technology stocks on Thursday.
Major Indexes Plunge, PHLX Semiconductor Drops Over 12%
US stocks suffered heavy selling on Thursday, with the Dow Jones Industrial Average falling 1833.06 points or 3.44% to close at 51523.06 points. The S&P 500 fell 334.89 points or 4.36% to close at 7353.73 points. The tech-heavy Nasdaq and the Philadelphia Semiconductor Index bled heavily, plunging over 5% and 12% respectively.
Technology stocks were the hardest hit, with the Nasdaq plunging 1421.51 points or 5.52%, its largest single-day drop in 19 months, closing at 24315 points and officially entering a technical correction zone. The Philadelphia Semiconductor Index plunged 1257.52 points or 12.25% to close at 9011.14 points. The scale of market value losses from the sell-off also set a record, with S&P 500 constituents estimated to have shed about 2.9 trillion dollars in market value in a single day, Nasdaq Composite constituents losing 2.5 trillion dollars, and the seven tech giants shedding about 1.04 trillion dollars combined.
AI Trades Face Multiple Tests
Chip stocks such as Nvidia and AMD suffered heavy selling, while data center operators, cloud computing infrastructure companies and power equipment suppliers fell in tandem. The AI trades that had previously supported US stocks in repeatedly hitting new highs are now facing multiple tests from policy risks to capital returns. Melissa Brown, head of global investment decision research at investment research firm SimCorp, said some newly elected members of Congress and governors are seeking to slow the pace of AI infrastructure development. While a complete halt is unlikely, any slowdown could spark market concerns, as growth in the AI industry relies heavily on rapid expansion of supporting infrastructure. UBS analysts estimate that about 30% of new US data center capacity expected in 2028 could be affected by potential construction moratoriums, underscoring the potential impact of policy shifts on AI infrastructure investment.