Technology stocks suffered a punishing sell-off today, sending shock waves through global markets as investors feared the Democrats’ victory in the US midterm elections could bring tougher oversight of artificial intelligence and slow the rapid expansion of data centres. Money flowed instead into the perceived safety of government bonds.
Japan’s Nikkei index plunged 6%, marking its sharpest one-day decline since April 2025. Benchmark share indices in South Korea and Taiwan fell more than 8% shortly after trading began, although both markets pared losses as officials moved to calm investors.
European equities also slid broadly, extending a bruising week for markets already unsettled by growing doubts over AI stocks after Democrats seized control of the US Congress.
London’s FTSE 100 was down 1.5% this afternoon, while Paris’s CAC 40 fell 1.2% and Frankfurt’s DAX declined 2.2%, although each index had recovered from earlier lows.
Overnight, Wall Street’s volatility “fear gauge” surged, the Nasdaq tumbled 5.5% and $3 trillion was erased from the value of S&P 500 companies. Investors worried that Democrats, who dominated this week’s midterm elections, could put the brakes on the AI boom.
But the tech-heavy Nasdaq rebounded on Wall Street after recording its steepest one-day fall in 19 months the previous night, a decline that confirmed the index had entered correction territory. It was still on course for a fourth consecutive weekly loss.
The Dow Jones fell 0.22% in early US trading, while the S&P 500 gained 1% and the Nasdaq Composite rose 1.8% to 24,758.
The political uncertainty has struck an AI trade that was already showing signs of strain. Investors have been questioning whether enormous spending on AI-related infrastructure will generate adequate returns, while the sell-off triggered margin calls and rattled retail investors and hedge funds.
“The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone,” said Dong Baozhen, chairman of asset manager Lingtong Shengtai.
“The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped. Can AI bull markets elsewhere hold up on their own?” he added
By the Asian afternoon, losses had eased as authorities sought to steady markets. South Korean Finance Minister Lee Hyoung-il temporarily relaxed rules governing leveraged investments by retail investors.
Multiple people told Reuters the Ministry of Finance in Taiwan contacted senior executives at state-owned banks on Thursday morning and directed them to support the market.
Taiwan’s stock market ended the session 4.5% lower, recovering from a sharper early decline. The index fell 12.2% over the week, its steepest weekly loss since 1991, according to LSEG data.
South Korean AI chipmakers Samsung Electronics and SK Hynix fell nearly 6% and 9.4%, respectively, though both stocks recovered from much steeper early losses. TSMC dropped as much as 8.5% in Taiwan before closing 4.7% lower.
In Japan, Kioxia sank 11%, while SoftBank Group, a major AI investor, also declined 11%. The cost of insuring against the Japanese company defaulting on its debt rose to its highest level in four years.
“After damage like the sort we’ve been facing, it is difficult to think that we simply can bounce from here,” said Steve Sosnick, chief strategist at Interactive Brokers.
“We may be oversold in the short term, but the underlying questions and causes can’t simply be wiped away.”
Sentiment shifts, cracks emerge
Investor anxiety also focused on whether a slowdown in AI infrastructure construction could damage smaller companies that are already struggling to raise capital amid higher interest rates and tighter financial conditions.
AI cloud computing provider CoreWeave, viewed as a barometer of concern over heavy AI spending and borrowing, fell 10%, while the company’s five-year credit default swap spreads widened to a record.
The selling suggests investors are beginning to account for growing local resistance to data-centre construction. Analysts said markets have not yet fully assessed the costs these projects have placed on surrounding communities.
Texas Governor-elect Gina Hinojosa said the state would introduce legislation to protect residents from the effects of data centres, pointing to their impact on rural communities.
Even so, some analysts argued that the sell-off had gone too far and that markets could be nearing a bottom.
“Today we are bound to see further liquidation of margin accounts, which suggests we are likely in the final stage of capitulation,” said Allen Huang, a vice president in the equities trading department at Mega Financial Holding.
“Even TSMC hit its daily limit down circuit breaker at one point, which typically marks the tail end of a downturn. When TSMC gets sold off, that means all stocks have been thoroughly dumped,” Huang said.
