Reported by The Guardian
Share index slumps 5% amid signs AI industry will face tougher regulation after Democrats’ midterm elections success
The Nasdaq share index was 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 because of the midterm election results.
As Wall Street sustained widespread losses, the Nasdaq composite tumbled into ‘correction territory’ – more than 10% below its recent record high. The tech-heavy index was heading for its biggest one-day fall since Donald Trump announced his “liberation day” tariffs on US trading partners in April 2025.
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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 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 1,500 points in early afternoon trading, a fall of 2.8%, to 51,868 points. The S&P 500 was down 3.7%.
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%.
An early stock market rally in Europe…