index slumps 5% amid signs AI industry will face tougher regulation after Democrats’ midterm elections success
The tech-heavy US Nasdaq share index is on track for its worst day in 18 months after slumping by up to 5% on Thursday amid growing signs that the artificial intelligence industry will face tougher regulation after this week’s midterm elections.
As Wall Street sustained widespread losses, the Nasdaq composite tumbled into ‘correction territory’ – more than 10% below its recent record high. The index was heading for its biggest one-day fall since Donald Trump announced his ‘liberation day’ tariffs on US trading partners in April 2025.
Worries over massive AI spending gripped the New York stock market and rippled out to other bourses worldwide as investors anticipated tougher scrutiny of datacentre expansion plans.
Chip stocks led the slump, with memory maker SanDisk tumbling by 19% and hard drive maker Western Digital falling by 16.5%.
Wall Street’s ‘fear index’, the VIX, jumped by 40% to its highest levels since the early weeks of the Iran war, in a sign of rising market volatility.
Analysts pointed to expectations that Democratic governors will clamp down on the rollout of new datacentres after the party won a series of gubernatorial races this week. US voters also rejected datacentres in a series of local ballots about the issue across the country.
Neil Wilson, investor strategist at Saxo UK, said a “complete capitulation level event” was playing out in tech stocks on Thursday.
“The fear is a total momentum unwind as Democrats pace the frontier and kibosh datacentre buildout … this looks totally overdone but the nature of ‘sell everything’ in this market means we need to look for some stability first,” Wilson said.
The Dow Jones industrial average (DJIA) of 30 large US companies was down more than 1,000 points in late morning trading, a fall of 2%, to 52,264 points.
Nvidia, the chipmaker at the heart of the AI boom, was the top faller on the DJIA – down 6.7%, followed by Goldman Sachs, which fell 5.7%.
The sell-off is a sharp reversal on Wednesday’s rally, when Wall Street stocks had their biggest daily gain in months as investors anticipated that the Democratic party’s success in the US midterm elections could restrain the White House.
Tech analyst Dan Ives has warned that the results of the midterms are a clear sign that the pace of datacentre buildout will start to slow down.
“There is no way to sugarcoat that Democrats taking control, especially over the Senate, will create some major hurdles for AI and tech legislation in the Beltway over the next two years,” Ives said.
An early stock market rally in Europe had fizzled out by late trading, with Britain’s FTSE 100 closing down 46 points or 0.4% at 10782.66.
