Nasdaq Loses $2.5 Trillion as AI Stocks Plunge After US Elections
The Nasdaq Composite dropped 5.5%, reflecting growing concerns about potential restrictions on AI infrastructure development. Meanwhile, the Nasdaq 100 fell 6.4% as major technology companies faced intense selling pressure.
Investors increasingly fear that political changes could slow the construction of data centres across the United States. Furthermore, higher borrowing costs and tighter financial conditions have raised concerns about funding large AI infrastructure projects.
The decline marked a second consecutive day of selling in AI-related stocks. Additionally, the Nasdaq Composite entered correction territory after falling nearly 12% from its October 6 record closing level.
A market correction typically occurs when an index declines at least 10% from a recent peak.
AI Chip Stocks Plunge as Data Centre Concerns Intensify
Semiconductor companies experienced some of the steepest losses as investors reassessed the outlook for AI infrastructure spending.
The Philadelphia SE Semiconductor Index plunged 12%, reaching its lowest level in more than six months. Meanwhile, Nvidia shares declined 9%, while Advanced Micro Devices (AMD) suffered a sharper 17% fall.
Furthermore, AI infrastructure companies faced additional pressure as investors questioned the financing of large-scale data centre developments.
CoreWeave shares dropped approximately 10%, while its five-year credit default swap spreads reached record highs. Consequently, market participants expressed growing concerns about the company’s borrowing risks.
Other AI infrastructure businesses, including Nebius, also faced scrutiny over their financing models. Higher interest rates have increased borrowing costs, making capital-intensive expansion projects more challenging.
Additionally, investors fear that greater local opposition could delay new data centre construction. Such projects require substantial investment in electricity, land, cooling systems and supporting infrastructure.
The Democratic Party’s midterm election gains have intensified concerns about potential regulatory and political obstacles. Moreover, investors are evaluating how local governments might respond to rising energy demand and infrastructure costs.
Consequently, uncertainty surrounding future AI infrastructure development has contributed to declining valuations across the semiconductor sector.
Nasdaq Selloff Hits Major Technology Companies and Global Markets
The broader technology sector also experienced significant losses as selling pressure spread beyond semiconductor manufacturers.
Amazon and Alphabet shares each declined 2.2%, despite initially showing resilience during the previous trading session.
Meanwhile, the Nasdaq 100 recorded a 6.4% decline, eliminating approximately $2.5 trillion in market capitalisation.
Furthermore, Wall Street’s volatility index, the VIX, registered its largest increase since December 2024. The sharp rise reflected growing expectations of substantial market fluctuations.
The Nasdaq Composite also recorded its fifth decline exceeding 500 points since mid-October. Consequently, investors have become increasingly cautious about technology valuations following months of strong AI-driven gains.
Additionally, the market downturn raised concerns about potential spillover effects across Asian stock exchanges.
Japan’s Nikkei and South Korea’s Kospi had gained more than 20% during the year. However, both markets experienced significant pressure following earlier declines in AI infrastructure stocks.
South Korea’s Kospi subsequently plunged more than 8% shortly after trading began, highlighting the sector’s global influence.
Furthermore, analysts expect volatility to continue as international investors reassess their exposure to semiconductor manufacturers and AI-related businesses.
The selloff also raised questions about the timing of Anthropic’s anticipated initial public offering. A prolonged market downturn could complicate fundraising conditions for technology companies seeking public listings.
AI Investment Risks Raise Questions Over Technology Stock Valuations
The sharp market decline reflects growing uncertainty surrounding the financial sustainability of rapid AI infrastructure expansion.
Technology companies have committed substantial capital to developing data centres, advanced computing systems and semiconductor technologies. However, investors are increasingly questioning whether future revenues will justify these investments.
Furthermore, higher interest rates have made financing more expensive for smaller AI infrastructure companies.
Businesses that rely heavily on external funding face particular challenges as investors become more selective. Consequently, companies with significant borrowing requirements could encounter greater financial pressure.
Meanwhile, concerns about electricity demand and local infrastructure costs have added another layer of uncertainty.
Large data centres consume considerable energy and require extensive supporting facilities. Therefore, community opposition and potential regulatory changes could affect construction schedules and investment returns.
Additionally, the recent market downturn suggests that investors are reassessing the valuations of companies closely linked to AI expansion.
The sharp declines in semiconductor stocks highlight how quickly sentiment can change when expectations shift.
Nevertheless, AI remains a major area of technological investment. However, investors are increasingly focusing on profitability, financing stability and the practical costs of infrastructure development.
The Nasdaq’s correction also demonstrates the broader financial risks associated with concentrated investment in high-growth technology companies.
As markets respond to political developments and financing pressures, further volatility could affect global technology shares.
Ultimately, the $2.5 trillion Nasdaq 100 selloff highlights growing concerns about AI investment costs, infrastructure expansion and the sustainability of technology sector valuations.
