Wall Street suffered a sharp stock market crash on Thursday, with about $2.5 trillion wiped from the value of US shares after Democrats’ sweeping midterm victory raised fears over the future of America’s artificial intelligence build-out.
The sell-off hit technology companies supplying data centres and microchips particularly hard, as investors considered whether Democratic control of the Senate could lead to restrictions or delays on new facilities.
The S&P 500 fell 3.5 per cent after opening and continued to weaken through the morning, putting it on course for its worst decline since President Donald Trump’s “Liberation Day” tariffs shook markets in April 2025.
The technology-heavy Nasdaq Composite dropped almost 5 per cent, moving firmly into correction territory after four weeks of gradual declines. Every sector in the S&P 500 was lower.
Chipmakers Nvidia and Broadcom each fell by more than 9 per cent in the first hours of trading, while Qualcomm dropped as much as 14 per cent. The iShares Semiconductor exchange-traded fund fell 11 per cent, its largest intraday decline since March 2020.
The market losses came a day after the Democrats took control of both houses of Congress, giving them the power to block legislation backed by Mr Trump. On Wednesday, the Dow Jones Industrial Average rose 1,100 points, or 2.3 per cent, while European indexes gained about 2 per cent.
Analysts said the election result was the immediate trigger for a market already vulnerable to bad news. Jakub Rochlitz, an analyst at eToro, said disappointing growth figures from Anthropic and OpenAI at the beginning of October had made investors more sensitive.
“That made the market more sensitive to negative news, which has piled up in recent days,” Mr Rochlitz said.
Nic Puckrin, a markets expert and former Goldman Sachs analyst, said: “The midterm election result didn’t really create a new fear, it was just the gust of wind that pushed over the house of cards that was already getting shaky.”
Investors are also contending with high levels of borrowing. Margin debt, used to finance investments, reached a record $1.5 trillion in June, around 50 per cent higher than a year earlier.
Federal Reserve data cited in the source material showed that US households hold a record 48 per cent of their financial assets in stocks, compared with 38.7 per cent at the height of the dot-com bubble.
Democrats’ plans for AI and data centres
Democratic leaders have said they intend to adopt a tougher approach to AI regulation when they take control of Congress in January 2027. Their priorities include mandatory safety testing, federal oversight of advanced AI models, curbs on data-centre expansion and measures aimed at protecting households from rising electricity bills.
Local ballot measures have also exposed opposition to data centres. Voters across the country backed proposals ranging from construction bans and temporary moratoriums to limits on energy use and requirements for residents to approve projects.
Mr Rochlitz said the election result, combined with disappointing technology earnings, had provided the catalyst for the sell-off. Mr Puckrin said it could take months for markets to assess the Democrats’ likely impact on AI investment, with any effect on data-centre construction taking longer to emerge.
Investors will be watching future spending plans from major technology companies, including whether infrastructure projects are moved from the US to Asia or the Middle East.
Elon Musk was among the notable losers. He spent nearly half a billion dollars supporting Republican candidates during the midterms, while shares in his electric car company Tesla fell almost 12 per cent on Thursday.
After the previous day’s losses, Tesla shares had fallen nearly 15 per cent over two days, reducing Mr Musk’s fortune by about $39.4 billion. SpaceX was down more than 12 per cent since the election, representing a further $113 billion paper loss for him and taking the combined figure to $152 billion.
The reversal came after Mr Trump claimed credit on Truth Social for Wednesday’s market rise, writing: “Stock Market just hit another Record High — 91 Days in just a short period of time — Less than two years. Your 401(k)s are through the roof. Record Setting All!”
