The U.S. stock market faced a sharp selloff as artificial intelligence and data center-related stocks declined amid growing concerns that the Democrats’ sweeping midterm election victory could slow the industry’s expansion through tougher regulatory scrutiny.
The Nasdaq 100 fell 4.5%, putting approximately $1.8 trillion in market value at risk, as investors reassessed the outlook for AI infrastructure spending and the possibility of delays in new data center projects.
The Philadelphia Semiconductor Index dropped 8.4% to its lowest level in more than six months. Major chipmakers, including Nvidia and Broadcom, were among the biggest losers.
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AI-focused cloud computing and data center companies also suffered heavy losses. CoreWeave shares fell 12%, while Nebius declined 15.2%. Applied Digital, Cipher Digital and IREN each lost more than 14%.
The selloff followed Democratic victories in several key races, including Texas and Georgia, which have emerged as major destinations for data center investments. Investors fear that Democratic control of Congress and state governments could bring additional oversight, stricter permitting requirements and possible construction pauses.
Around 30% of expected U.S. data center capacity additions in 2028 could be at risk from potential construction pauses, UBS analysts estimated, highlighting the potential consequences for an industry dependent on rapid infrastructure development.
The losses extended beyond data center operators to companies supplying electricity and equipment for the infrastructure buildout. GE Vernova fell about 6%, while Constellation Energy declined 3%. Microsoft shares also dropped 2%.
Qualcomm plunged 12% after its quarterly smartphone chip sales missed Wall Street estimates, adding to the pressure on semiconductor stocks.
Investors reassess AI spending
The market reaction reflects growing concerns about the enormous investments required to build AI infrastructure and whether technology companies can generate sufficient returns from that spending.
“The market’s moving from the promise of AI to the price of AI,” Ted Parkhill, founder and CEO of Incline Investment Management, told Reuters.
He said AI would transform the world over the long term but cautioned that not every AI-related stock was appropriately valued, warning of further market volatility.
Matthew Tuttle, founder and CEO of Tuttle Capital Management, said Wall Street was looking for positive developments in the AI sector but faced the prospect of political gridlock under divided government.
The Nasdaq Composite was also on course to confirm a correction, defined as a decline of 10% from its recent peak.
The latest selloff comes a day after Democrats secured sweeping victories in the midterm elections, including in states that have become major centers for data center development.
The results have increased uncertainty for technology companies planning multibillion-dollar investments in computing infrastructure, particularly as communities across the country raise concerns about electricity consumption, water usage and the environmental impact of large facilities.
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The market reaction also comes as OpenAI has announced measures to improve transparency and community engagement around its data center projects, seeking to address growing public resistance to the industry’s expansion.
As political scrutiny intensifies, investors are increasingly weighing the regulatory risks and financial costs of the AI infrastructure boom against its long-term growth potential.