US stocks drop sharply as Democrats win raises fears about AI investment

US stocks shed $3.2 trillion (€2.85 trillion) in a day of chaotic trading which saw the tech-heavy Nasdaq 100 plunge 6.4 per cent after the Democrats’ sweeping midterm election victory upended Wall Street’s mammoth AI bet.

The market value drop on the broad S&P 1500 Composite index on Thursday was among the biggest wipeouts since the turn of the millennium as investors rushed out of shares linked to AI.

The rout came amid fears that Democrats’ stunning victory over Donald Trump’s Republicans in Tuesday’s midterms would prompt a slowdown in the AI spending boom that has driven Wall Street to record highs this year.

“[Investors] are throwing in the towel and indiscriminately liquidating,” said Adam Crisafulli, president of market research group Vital Knowledge.

Selling in the tech sector was brutal, with Nvidia, the chipmaker most closely associated with the AI surge, tumbling 9.3 per cent, pushing its market value down more than $400 billion. The benchmark S&P 500 lost 4.4 per cent, its worst session since April 2025 in a session marked by big swings. Its fall showed the selling spreading beyond AI stocks into the general market.

“With the blue wave, investors fear that peak [AI capital spending] is behind us,” said Charles-Henry Monchau, chief investment officer at Swiss private bank SYZ Group.

One hedge fund portfolio manager said the move appeared to be “de-grossing”, in which fast-money investors cut big positions.

“People are starting to get worried now, today the move was so swift,” said another hedge fund executive.

Investors fear that newly elected politicians who campaigned against data centres will hit the brakes on AI infrastructure development, upending Wall Street’s expectations for vast spending on chips, servers and facilities that have powered stocks to record highs this year.

“Guys who would normally be bargain hunting, excited by these low prices, they’re not jumping in ... everyone’s hiding out in cash,” said the chief executive of a New York brokerage.

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Vincent Mortier, the investment chief of Amundi, said the “honeymoon” gains for US stocks on the day after Democrats won control of Congress had been “very shortlived”.

He added that the tech repricing was “harsh and quick as the fundamental question marks resurface under the microscope of the new political US picture – data centres backlash, new regulation”.

Abdul El-Sayed, the Democratic senator-elect from Michigan, has said there should be a “full-on pause” in frontier development, arguing that “you’re seeing the pace of technological development outpace the pace of safety”.

Incoming South Carolina senator Annie Andrews proposed a two-year ban on new data centre construction to stop communities “getting steamrollered” by “incredibly wealthy, powerful companies”.

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Chipmakers were among Thursday’s biggest declines. Qualcomm dropped 9.5 per cent, Broadcom fell 10 per cent and Micron shed 17 per cent.

Elon Musk’s companies, which are both based in Texas, where Democrats won the race for governor and their first Senate seat for more than 30 years, had another bad day.

Tesla fell 10.8 per cent, adding to a 3.3 per cent drop on Wednesday, while SpaceX was down 9.1 per cent, on top of a 3.8 per cent drop the previous day. – The Financial Times Limited 2026