For the past couple of years, global stock markets have been pushed higher by two things: artificial intelligence and semiconductor hardware. But a sharp turn in American politics after the US midterm elections has now cast fresh doubt over technology valuations. The tech-heavy Nasdaq Composite lost 5.5% in a single trading session, while the Nasdaq 100 fell 6.4%, wiping out around $2.5 trillion in market value. It was Wall Street’s biggest one-day drop since April 2025. Tech shares have driven much of the market’s gains, so a fall of this size is felt well beyond the US. It reflects growing fears among investors worldwide that the election results could change both the pace of AI growth and the level of regulatory scrutiny facing data centres.
For readers outside the US, the sell-off shows how much technological progress depends on physical infrastructure and government policy. When an AI chatbot answers a question, the work is done in a huge building full of chips, often called a hyperscale data centre. These sites need a lot of land, extensive water-cooling systems and vast amounts of electricity from regional power grids. Democrats won big in the midterms, which financial commentators often call a “blue wave”. Investors now fear tougher environmental reviews, stricter local zoning rules and closer scrutiny of how much energy companies use.
The pullback hit hardest in semiconductors and the hardware supply chain. Chip giant Nvidia fell 9%, Advanced Micro Devices dropped 17%, and the Philadelphia Semiconductor index lost 12%, its lowest level in more than six months. Independent data-centre operators such as Applied Digital, Cypher Digital and IREN all fell more than 14%. The pressure also reached power and equipment suppliers, with GE Vernova down 7.4% and Constellation Energy down 2.5%.
Even the big tech companies that had held up through earlier swings felt the strain. Alphabet dipped 2.2% and Amazon slipped 2.2%. Microsoft dropped 3.6% on news that it is looking more closely at contracts for outside data-centre development. Big tech firms are among the biggest buyers of AI chips, so any slowdown in their building plans hits chip makers directly. Meanwhile, the VIX, Wall Street’s main measure of expected volatility, jumped by its largest amount in almost two years, a sign of widespread nervousness on trading desks.
The core issue isn’t that demand for AI is shrinking. It is that building the physical sites is getting harder. Many specialist computing and cloud-infrastructure start-ups have borrowed heavily to build facilities ahead of demand. Higher interest rates and tighter regulation could make it much tougher to win local approvals and funding for projects that don’t yet have permits. Local worries about pressure on community power grids and rising household electricity bills are also becoming important political questions.
The effects spread quickly overseas. Asian markets opened sharply lower, and in South Korea early selling triggered an automatic trading circuit breaker. European and East Asian suppliers of memory chips, circuit substrates, and cooling components are currently considering whether major US tech firms will alter their spending plans.
The sudden drop is a reminder that any tech boom has physical and regulatory limits. As governments around the world look more closely at the environmental impact, energy needs and market power of AI platforms, the industry may be moving from a phase of rapid, lightly regulated growth to one shaped more by compliance and infrastructure constraints. Whether that happens and how fast will depend on the policies that actually follow the election. For ordinary investors and pension funds that hold tech shares through index funds, the swings also show how concentrated markets have become in a few AI-linked companies.
