US midterm results trigger Wall Street rout and AI sell-off
Trillions of dollars in market value were wiped out as technology stocks and riskier assets declined on Thursday.
Wall Street experienced a significant rout on Thursday as US midterm election results and concerns over artificial intelligence (AI) valuations triggered a widespread sell-off. According to Mint, the decline began shortly after the New York Stock Exchange opening bell and worsened throughout the day, wiping out trillions of dollars in market value.
The Nasdaq 100 plunged more than 6 per cent, marking its worst single-day fall since March 2020, while the S&P 500 declined 4.4 per cent. The Philadelphia Semiconductor Index, which tracks major chipmakers, dropped 12 per cent, also recording its worst session since March 2020, Bloomberg reported.
Democratic victories in the US midterm elections added political pressure, as candidates campaigned on strengthening oversight of the AI industry and slowing data-centre expansion. In Texas, Democratic governor-elect Gina Hinojosa has pledged a moratorium on new data-centre construction.
The sell-off extended beyond Big Tech to riskier assets. A basket of the most-shorted US stocks fell nearly 8 per cent, while unprofitable technology companies, including Roku and Peloton Interactive, declined 7.7 per cent. The Russell 2000 index, which tracks smaller companies, dropped 4.5 per cent, moving into correction territory.
Investor anxiety was reflected in the Cboe Volatility Index (VIX), which rose 11.57 points to close at 28.18, its highest level since March, Bloomberg reported. Neil Wilson, an investor strategist at Saxo UK, told Business Standard that fund managers were reducing overall exposure to AI investments as the trade became more difficult.