US midterms spark massive tech sell-off as stricter data centre rules loom

UPDATE - follow-up to Nvidia and SpaceX lose billions in market value as tech and AI stocks plummet: The Nasdaq composite index dropped over 5.5% on Thursday, wiping out more than $2 trillion in market value as artificial intelligence shares plummeted across the board.

Market Impact

Dow Jones data shows major US stock indexes suffered steep losses alongside the tech sector. The S&P 500 closed 4.4% lower, while the Dow Jones Industrial Average dropped more than 3.4%. These sharp declines pushed the Nasdaq into correction territory, sitting at least 10% below its recent peak. Semiconductor makers bore a heavy brunt of the panic. Nvidia shares tumbled over 9% to erase more than $400 million in value. Advanced Micro Devices and Micron both slumped by more than 17%, Intel dropped 10.3%, and SanDisk fell past 22%. The Philadelphia Semiconductor Index tumbled over 12%. Elon Musk enterprises also took a major hit, with SpaceX and Tesla shares sliding 8% and nearly 11% respectively to shed over $300 million on Thursday. Altogether, the group known as the magnificent seven, which includes Apple, Nvidia, and Tesla, lost a trillion dollars in a single trading session.

Election Fallout

The broad market rout follows Democratic wins in key US mid-term races where candidates campaigned heavily against the fast-paced growth of data centres. Texas governor-elect Gina Hinojosa led a strong push against these hubs, promising a complete pause on new building projects in the sector. Elon Musk had invested nearly $450 million to support Republican campaigns, including at least $45 million for Ken Paxton in a Texas senate race, but Democrats ultimately flipped Texas during the Tuesday vote. Susannah Streeter, chief investment strategist at Wealth Club, noted that fresh panic was gripping Wall Street. She explained that anxieties over whether massive AI spending will yield expected profits are now mixing with the threat of delayed data centre construction.

Industry Response

Tech leaders admitted they were caught off guard by the sharp community and political pushback against infrastructure projects. OpenAI president and co-founder Greg Brockman stated at the WSJ Tech conference in Napa, California, that the industry must engage directly with local populations rather than relying on social media posts. Meta president Dina Powell McCormick added that tech companies must work much harder to explain the benefits of artificial intelligence to the public. Beyond election outcomes, investors also worried that soaring AI valuations might represent a fragile bubble heading for a harsh correction.

Context

Data centres require immense amounts of electricity and water to run, which often creates local resource strains and community resistance. When political shifts lead to stricter local rules or building pauses, the expensive hardware supply chain instantly feels the financial strain.