Global markets fell sharply after the Wall Street collapse, which wiped out about $2.5 trillion in market value, on Thursday, amid fears that Democratic gains in the midterm elections would slow the pace of artificial intelligence development.
South Korea's KOSPI index fell by approximately 9% at the market opening on Friday, which required the suspension of trading on the stock exchange for 20 minutes. This came after the Nasdaq index fell by 5.52% and closed more than 10% lower than its record high on October 6.
The Nasdaq index, which mainly includes technology companies, witnessed its worst day since April 2025, when President Donald Trump announced sweeping global tariffs. On Thursday, the selling wave extended to broader indices, with the S&P 500 and the Dow Jones recording their worst performance since April 2025.
This represents a sharp decline from the historic high that followed Wednesday's midterm elections, when the Dow jumped 1,569 points and the Nasdaq rose 1.44%. By Thursday, the Dow Jones closed down 1,833 points, reversing all of those gains.
While major indices rose on Wednesday, shares of chip manufacturers and those working in the field of building data centers dedicated to artificial intelligence were declining. This selling pressure intensified on Thursday, pushing the indices down sharply.
The decline in stock prices is mainly attributed to the Democrats' victory in the governor's elections in Texas, given the state's pivotal role in accelerating the pace of development of artificial intelligence, as giant companies such as Google, Meta, Oracle, and OpenAI have invested huge sums in data centers there. During her election campaign, Governor-elect Gina Hinojosa focused on imposing a temporary ban on the construction of data centers and eliminating some tax incentives for companies that establish data centers in the state.
Shares of electronic chip manufacturing companies, as well as shares of companies working in the field of establishing data centers and the boom in artificial intelligence, are witnessing a noticeable decline as investors await the repercussions of the Democratic victory in states such as Texas, which are major centers for planned data centers.
Nvidia shares fell by 9.3% on Thursday, erasing the gains it achieved this year. A widely followed index for chip manufacturing companies also fell by 12.3%, recording its worst daily performance in about six and a half years. Shares of Tesla and SpaceX, owned by Elon Musk, fell by 11% and 9%, respectively.
The Nasdaq 100 index, a smaller index that includes major technology companies, fell by 6.36%, recording its worst daily performance since March 2020, when the beginning of the Covid-19 pandemic led to turmoil in the markets.
Investors faced great difficulty in determining whether curbing the expansion of artificial intelligence might create unique investment opportunities, or would exacerbate problems, as the shares of Amazon, Meta, and Google, which are the main drivers of artificial intelligence infrastructure development, witnessed a noticeable rise on Wednesday. Driven by expectations that imposing new restrictions may contribute to saving cash that would have been allocated to investment in data centers, thus enhancing profitability. But by Thursday, investors' outlook towards these stocks had changed, as there was fear that these restrictions would have an overall negative impact.
As data centers become increasingly important in powering everything from artificial intelligence technologies to the Internet as a whole, the rapid pace of construction has raised questions about whether companies are overextending; So they may end up having more computing power than actual demand will ultimately justify.
The technology sector in general has witnessed sharp fluctuations this year, and this volatility is likely to continue with the upcoming Anthropic IPO and the expected OpenAI IPO next year.
The Nasdaq index, which is heavily skewed towards technology companies, closed lower in March, then rebounded to record record levels in early June, before declining and almost entering a correction phase in late July, then regaining record levels in September and October, before slipping again into correction territory on Thursday.
Overall, the Nasdaq has fallen about 12% and the S&P 500 about 6% since their peak on October 6, and the Dow Jones has fallen about 5% since its peak on August 5.
