Tech stocks fell sharply on Thursday, with the Nasdaq dropping more than 5% and erasing more than $2 trillion in market value. The Dow Jones and S&P 500 also declined. The selloff reversed a rally from Wednesday, when shares had risen across the board after the midterm results left control of Congress clear.
Investors worried that an incoming Democratic Congress would crack down on the artificial intelligence industry. Voters also sent a message against AI data centers, which critics say strain water and energy supplies. Democrats who pledged to slow those projects won seats in Congress and in state races, including Gina Hinojosa’s win in the Texas governor’s race.
Companies such as Meta and Alphabet, Google’s parent, still need to expand their data centers to keep developing the technology. AI-related stocks were among the biggest decliners, and Tesla and SpaceX, both controlled by Elon Musk, fell sharply. Investors also worry that Musk’s companies could draw Democratic scrutiny when the new Congress convenes in January.
The drop follows a difficult year for technology shares, as investors question whether heavy AI spending will pay off soon. It is unclear whether the selloff will spread beyond tech. Average Americans could feel it, too, since many hold AI stocks in 401(k) plans and pension funds.
