US stocks: Wall street bounces back after hitting 18-month low as chipmakers rally

Wall Street rebounded from its 18-month low on Friday, led by a sharp recovery in semiconductor stocks, as investors assessed the potential impact of Democratic election victories on the US artificial intelligence (AI) industry. The recovery followed a steep selloff in the previous session, triggered by fears that the election results could lead to tighter regulations for the AI sector, wiping out trillions of dollars in global stock market value. The gains were led by technology, communication services and industrial stocks. The S&P 500 rose a marginal 0.31% and the Nasdaq Composite advanced 1.1%, while the Dow Jones Industrial Average slipped 0.46%. However, despite Friday's recovery, all three indices ended the week lower following the previous session's sharp losses.

Semiconductor stocks emerged as the biggest beneficiaries of Friday's rebound. The Philadelphia Semiconductor Index gained 4.2%, recovering after suffering its biggest single-day decline since April 2025. Nvidia shares climbed nearly 3%, reversing some of the losses from its previous session, when the stock recorded its worst performance since January 2025. At the time, the emergence of Chinese AI model DeepSeek, which offered a low-cost alternative, had triggered a sharp market reaction. The recovery extended across other major chipmakers. AMD, Intel and Micron Technology ended the session between 5% and 11% higher. Elon Musk's Tesla and SpaceX also bounced back, gaining 4% and nearly 9%, respectively, after declining earlier in the week. Despite Friday's gains, uncertainty over the future regulatory environment continued to weigh on investor sentiment. "Most of the disruption of the AI buildout will not probably occur but it's just the uncertainty of the change in government from Republican-led to Democratic-led, not only at the federal level but the state, local levels," said Gerry Sparrow, president and portfolio manager at Sparrow Capital Management. "That's causing some disruption in the expectations of investors ... The volatility around elections or any political event, whether it be war or terrorist attack, is always going to disrupt the market."

The prospect of tighter oversight of the AI industry is also emerging at the state level. Texas Democratic Governor-elect Gina Hinojosa said on Thursday that the state would introduce new laws to protect local communities from further large-scale data centre development. Texas already has a substantial share of data centres in the US, making the proposed measures an additional concern for investors tracking the expansion of AI infrastructure. The latest uncertainty comes as the AI trade is already facing questions over the enormous costs involved in building data centres and other infrastructure. Investors are concerned that the scale of these investments could limit future returns. These worries have added to market volatility, triggering margin calls and unsettling retail investors as well as hedge funds.

Friday's recovery on Wall Street was in sharp contrast with the performance of other major global markets, where the selloff continued. European equities weakened, with the STOXX 600 declining 1%. In Asia, Japan's Nikkei and South Korea's KOSPI both plunged around 6%. The Nikkei recorded its biggest one-day decline since US President Donald Trump's "Liberation Day" trade tariff turmoil in April 2025. The fall was comparable to Wall Street's previous session, when US stocks suffered their biggest single-day decline since the same period. The broader global market indicators also remained under pressure. The MSCI All-World index fell 0.68%, while MSCI's broadest index of Asia-Pacific shares outside Japan dropped nearly 3%.