Another wipe-out for stocks tied to the buildout of AI data centres is overwhelming Wall Street overnight and more than erasing all its gains from the day before, which was its best in three months.
The S&P 500 fell 3.5% after opening with a loss that accelerated through the morning. It's on track for its worst drop since President Donald Trump shook markets worldwide in April 2025 after announcing his "Liberation Day" tariffs.
The Dow Jones Industrial Average was down 1433 points, or 2.7%, as of 12.26pm (local time), and the Nasdaq composite was 4.7% lower.
Stock markets worldwide felt pressure from continued drops for companies that benefited from the boom in the artificial-intelligence technology industry, and South Korea's Kospi index tumbled 5.3%. Such stocks have been swinging for months on worries that the construction of further AI data centres may slow because of how expensive it’s become to borrow money.
Wednesday's US midterm elections added another challenge. The nationwide victories by Democrats raised the possibility that governments could force pauses in construction of more data centres. That would mean fewer purchases of AI chips, not to mention electricity and other products and services that are getting vacuumed up in the AI frenzy and driving much of the US economy’s growth.
Nvidia fell 7.5% and was by far the heaviest weight on the S&P 500, a day after dropping 3.2%. Advanced Micro Devices tumbled 14.6%. CoreWeave, a company that rents access to AI chips to customers over the cloud, fell 12.1%.
GE Vernova, which has been helping to power data centres, sank 6.1%.
AI chip stocks are some of Wall Street’s most influential because they’ve become some of the largest. A 1% move for Nvidia, for example, has more effect on the S&P 500 than a 1% move for nearly any other US stock.
The losses were broad, with every sector in the S&P 500 losing ground. The overwhelming losses drowned out a few big gains, including a 28% jump for AppLovin after the marketing platform reported both revenue and profit that topped analysts’ expectations. The company also approved a program to send up to US$3.2 billion (NZ$5.7 billion) to its investors by buying back its own stock, bringing the program’s total potential value to US$3.6 billion (NZ$6.4 billion).
Tapestry rallied 6.6% after the company behind the Coach and Kate Spade brands likewise delivered a stronger profit than expected. It also raised its forecasts for revenue and earnings this fiscal year.
Stock prices tend to follow where corporate profits and interest rates go over the long term, depending on them much more than on who controls what in Washington.
In other financial markets, the initial knee-jerk reaction to the US midterm election results faded a bit. The price of a barrel of Brent crude oil rose 2.6% to US$97.11 (NZ$173.28) and recovered a chunk of its nearly 9% drop from the day before. Uncertainty still reigns about what will happen in the war with Iran and when the global energy industry can return to normal.
In the bond market, Treasury yields continued to ease. The yield on the 10-year Treasury fell to 4.83% from 4.90% late Wednesday. It had been at 4.95% on election night and above 5.30% last month.
That could be a signal that investors are herding into US Treasury bonds in search of something that’s safer to own than stocks. The drop also came despite some encouraging reports on the US economy.
Fewer US workers applied for unemployment benefits last week. A separate report, meanwhile, suggested overall productivity for US workers improved by more during the summer than economists expected. That could help the economy grow without adding pressure to the nation’s high inflation.
In stock markets abroad, indexes were mixed in Europe and Asia. Besides South Korea, Japan’s Nikkei 225 also felt the sting of drops for tech and AI-related stocks and sank 1.8%.
London’s FTSE 100 dipped 0.4% after the Bank of England increased its main interest rate for the first time in three years to help limit high inflation.
The bank said its next moves on interest rates largely hinge on what happens with the Iran war, which sent oil prices and inflation higher worldwide.
"We've seen encouraging news in the past 48 hours," Bank Governor Andrew Bailey said at a press briefing. "The best thing that can happen is to resolve the conflict in the Middle East; there’s no question about it."
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