Nasdaq worst drop 19 months as tech shares fall 5.5%
The Nasdaq fell 5.5% on Thursday, its steepest daily drop in 18 months, as concerns about tighter scrutiny of data center expansion hit technology stocks. More…
The Nasdaq suffered its steepest daily fall in 18 months on Thursday, dropping 5.5% as concerns about tighter scrutiny of artificial intelligence data center projects shook US markets. More than $2tn was erased from the tech-heavy index’s value by the end of trading.
The sell-off spread beyond technology shares. The Dow Jones industrial average fell 3.4% to 51,868 points, while the S&P 500 lost 4.3%. In early trading on Friday, Japan’s Nikkei 225 dropped 6% and South Korea’s Kospi fell more than 8%.
The plunge pushed the Nasdaq into correction territory, defined in the market report as more than 10% below its recent record high. The losses marked a sharp reversal from Wednesday, when Wall Street recorded its biggest daily gain in months.
Why did the Nasdaq fall?
Investors grew concerned that results from the US midterm elections could lead to tougher limits on data center expansion. Democratic candidates won a series of gubernatorial races, while voters rejected data centers in local ballots across the country.
Analysts said the election results raised expectations that Democratic governors would clamp down on new facilities. That prospect matters for technology companies investing heavily in the infrastructure needed to support artificial intelligence, and it sent concerns about spending and future growth through the wider market.
Chip stocks led the decline. Memory maker SanDisk fell 22%, while hard drive maker Western Digital dropped 17%. Nvidia, a major beneficiary of the AI boom, slid 9.2% and was the biggest loser on the Dow Jones industrial average.
Market volatility also jumped. The VIX, known as Wall Street’s fear index, rose 61% to its highest level since the early weeks of the Iran war. The broad losses reflected investors’ reassessment of technology shares as questions about the pace of data center construction weighed on expectations.
What did market analysts say?
Neil Wilson, investor strategist at Saxo UK, described the technology sell-off as a “complete capitulation-level event.” He said investors were reacting to fears that Democrats could slow data center construction, while cautioning that markets needed to find stability.
“The fear is a total momentum unwind as Democrats pace the frontier and kibosh datacentre buildout … this looks totally overdone but the nature of ‘sell everything’ in this market means we need to look for some stability first,” Wilson said.
Tech analyst Dan Ives said the midterm results could slow the pace of data center construction. He warned that Democratic control, especially over the Senate, would create hurdles for AI and technology legislation in Washington over the next two years.
Ted Parkhill, founder and CEO of Incline Investment Management, said investors were shifting their attention from AI’s promise to its cost. He said the technology could transform the world over the long term, while warning that AI-related stocks might not all be priced appropriately and that markets could face turmoil.
The rout extended into Europe, where an early rally faded. Britain’s FTSE 100 ended down 46 points, or 0.4%, at 10782.66. The Dow Jones industrial average finished the day more than 1,800 points lower.
