Just over a day after Democrats scored huge victories in the midterm elections, investors fled artificial intelligence stocks on Thursday on worries that the new Congress will slow the multi-trillion dollar data center boom. The sell-off wiped out record market capitalization in one session.
The S&P 500 index fell 4.36% to 7,353.73 points, and its companies lost a record $2.9 trillion in market value. The tech-heavy Nasdaq fared even worse. It plummeted 5.52% to 24,315 points, losing $2.5 trillion.
The Dow Jones Industrial Average fell 1,833 points, or 3.44%, to 51,523.06 points. That wiped out all of Wednesday’s 1,500-point gain, its best day in a year and a half.
Retirement savers have also been hit. One fund manager estimated that 401(k) plans lost about 4% in one day.
The Magnificent Seven alone lost more than $1 trillion. Nvidia shares fell 9%, losing $374 billion in market value. Tesla and Microsoft lost $161 billion and $117 billion respectively.
Broadcom fell 10% and Oracle fell 7%. Qualcomm shares fell 9% on the pessimistic forecast despite profit beating expectations. The “Neocloud” company that rents out artificial intelligence computing power was the hardest hit, with Nebius falling 15% and CoreWeave falling 10%.
President Donald Trump said the stock market slide was a “sad thing” and blamed the election results on Democrats and the Blue Wave.
“We worked a lot to get to unprecedented levels and then this. So your 401(k)s have gone down. Remember, it’s not the Republicans, it’s the Democrats. But don’t worry, no matter what, we’ll soon be bigger and stronger than ever,” Trump said Thursday night.
Nasdaq and S&P futures rebounded slightly Friday morning, but Dow Jones futures remained underwater.
The worry is that Democrats will go after artificial intelligence.
Senator Bernie Sanders didn’t wait, demanding an “immediate moratorium on the NDC.” Rep. Greg Casar (D-TX) and others on the left want to rein in what Trump calls “super intelligence” and halt new construction altogether. California Rep. Ted Lieu promised public hearings and new artificial intelligence “guardrails.” Party leaders want tech CEOs to testify under oath.
The pain is likely to be greatest in Texas, which accounts for about a quarter of the nation’s planned data center capacity. Democrats flipped the Senate there, with Gina Hinojosa ousting Gov. Greg Abbott after suspending her campaign for new projects.
Tech bull Dan Ives has warned that construction will slow significantly by 2028. UBS estimates that about 30% of planned production capacity may be affected.
Voters are already unhappy with these power-hungry projects. Ballot measures in communities across the country overwhelmingly oppose new data centers.
Democrats are divided over how far to go, and any sweeping crackdown would likely face a veto from Trump. Some on Wall Street say the real threat is governors and local regulators, not Congress.
Not everyone blames politics; some fund managers believe tech stock valuations are too far removed from reality and are destined to fall.
OpenAI has pledged to reduce peak hour electricity use and expose the impact of noise and water.