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How Democrats' US midterm victory triggered a global tech stock rout over fears of AI slowdown
The US and Asia stock market rout comes amid investor fears that the Democrats' growing political influence could lead to tighter scrutiny of AI.
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The sweeping Democratic victory in the United States midterm elections has triggered a major sell-off in global technology stocks, wiping out trillions of dollars in market value.
The US and Asia stock market rout comes amid investor fears that the party's growing political influence could lead to tighter scrutiny of artificial intelligence (AI) development and slow down the expansion of data centers.
On Thursday, the Wall Street reportedly witnessed its steepest decline since April 2025, with the tech-heavy Nasdaq Composite plunging 5.5 per cent. The S&P 500 Index plunged 4.4 per cent, while Nasdaq 100 slid 6.4 per cent. The rout spread to spread to Asian markets on Friday, further affecting chipmakers in Japan, South Korea and Taiwan.
The market turmoil comes amid growing concerns over whether the enormous amounts being invested in AI infrastructure will generate the returns investors expect.
Several Democrats who registered victories in the recently concluded US midterms have made statements against AI and the rapid expansion of data centers, raising concerns of possible construction curbs.
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US President Donald Trump blamed the plunge in global tech stocks on his opponents, claiming that the stock markets had seen “one of the worst days in history based on the results of the election.” “Remember, it wasn't Republicans, it was Dumocrats,” he added in a post on Truth Social.
Democrats' win raises fears over curbs on expansion of AI data centers, infrastructure
In the November 3 US midterm election results, the Democrats won control of both the US Senate and House of Representatives, while also flipping long-time Republican control of governorships in Texas, Ohio, Georgia, Nevada and Iowa, the Associated Press reported.
While AI and its infrastructure were not among the key issues highlighted by the Democrats, the candidates, during their campaigning, did put forward hardline stances on these.
South Carolina Senator-elect Annie Andrews spoke against what she said were “decisions” made by billionaires or data center companies for their communities. She said she was standing for “a South Carolina where decisions about our communities are made by the people who live in our communities, not the billionaires or data center companies in Washington, DC.” Texas' Democratic governor-elect Gina Hinojosa campaigned heavily against data centers, also promising a moratorium on new construction in the sector.
Senator-elect from New Hampshire, Chris Pappas, also said that “big data centers” were causing harm to the state's communities and their well being. Democrat Mark Warner, elected from Virginia, said AI safety was “too important” to be left to “tech bros” and United States President Donald Trump, whose Republican Party faced a huge setback in the midterm polls. Ohio Senator-elect Sherrod Brown too, made his stand clear on AI, saying, “I do not work for data centers.”
“The big election outcome was, especially with the Democrats winning a lot of the governorships, that the slowdown of the data center buildout is the real key theme that's going to stick,” Reuters quoted Michael O'Rourke, chief market strategist at JonesTrading in Stamford, Connecticut, as saying.
Around 40 per cent of pending data center capacity in the US is planned to be built in states where newly elected Democratic governors have promised to stop or pause such construction, according to data from Cleanview, a market intelligence company.
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Investors concerned on returns to AI spending; chipmakers bear brunt of selloff
Shares in firms across the tech and AI sectors took a plunge following the Democrats' victory, amid concerns about whether the huge amounts being spent on AI will pay off, BBC reported. With this, shares in companies which are heavily exposed to AI data centres, including crucial chipmakers and semiconductor manufacturers, fell sharply on Thursday, highlighting these worries.
Nvidia shares slid more than nine per cent, wiping out more than $400 billion off the firm's market value in New York trading. In European trading, chipmaker Infineon's shares fell by more than 8.5 per cent and those of tech equipment manufacturer ASML dropped by 6.5 per cent.
AMD and Micron also suffered a setback, witnessing a drop of over 17 per cent. Intel shares were down 10.3 per cent, while memory card maker SanDisk plunged more than 22 per cent, according to BBC. Shares in Elon Musk's SpaceX and Tesla also dropped by eight per cent and 11 per cent, respectively. This is signficant, given that Musk spent nearly $450 million to back Republican campaigns.
AI rout spreads to Asian markets
Asian stocks also declined after the sharp global tech sell-off on Thursday, with Japan's stock benchmark tumbling more than 6 per cent after trading opened Friday, according to the Associated Press.
Tokyo's benchmark Nikkei 225 recovered some of those initial losses, trading 5.7 per cent lower at 57,576.63 by midday. South Korea's Kospi dropped 7.4 per cent to 4,985.99. Hong Kong's Hang Seng fell 0.7 per cent to 24,630.03. Samsung Electronics shares shed 7.9 per cent in morning trading. The Shanghai Composite dipped 1.3 per cent to 3,642.10.
