Global stock markets came under heavy selling pressure on Friday, extending a technology-led rout on Wall Street, as investors reassessed the outlook for the artificial intelligence boom following the Democrats' sweeping victory in the US midterm elections.
Shares of semiconductor manufacturers, data centre operators and other companies linked to AI infrastructure bore the brunt of the sell-off, amid concerns that the Democrats' takeover of Congress and victories in key state elections could bring tougher regulation, restrictions on data centre development and a slowdown in the massive investments underpinning the AI industry.
The sell-off wiped out about $2.5 trillion in market value from the Nasdaq 100 on Thursday, as the technology-heavy Nasdaq Composite plunged 5.5 per cent in its steepest one-day decline since the tariff-triggered market turmoil of April 2025. The broader S&P 500 dropped 4.4 per cent, while the Dow Jones Industrial Average lost 1,833 points, or 3.4 per cent.
The rout spread to Asia on Friday, with South Korea's Kospi falling more than 8 per cent at one stage, triggering a circuit breaker that temporarily halted trading. Japan's Nikkei dropped around 6-7 per cent, while Taiwan's benchmark index fell more than 8 per cent.
The losses reflected growing investor concern that the political shift in Washington could threaten the rapid expansion of AI infrastructure at a time when technology companies are already facing questions about the sustainability and returns of their enormous investments.
Data centre expansion under threat
The Democrats' victory has raised the prospect of greater scrutiny of the energy consumption, environmental impact and local costs of the data centre boom, which has become central to the AI investment cycle.
The party secured control of both chambers of Congress in a major setback to President Donald Trump, while making significant gains in state-level contests. The results have strengthened the position of politicians who have called for tighter oversight of AI companies and restrictions on the construction of large data centres.
Local opposition has also emerged as a significant risk. Of 45 data centre-related ballot initiatives across the US, voters backed restrictions in 39, according to data cited by Reuters. The results point to growing resistance among communities concerned about electricity demand, water consumption, land use and the impact of data centres on household power bills.
Texas, one of the country's fastest-growing data centre markets, is among the states drawing particular attention. Governor-elect Gina Hinojosa has pledged to halt new data centre construction, raising concerns about the future of projects planned in the state.
UBS analysts have estimated that potential construction pauses could put around 30 per cent of planned US data centre capacity additions in 2028 at risk.
The implications extend well beyond data centre developers. The AI boom has generated enormous demand for advanced chips, memory, servers, networking equipment and cooling systems, benefiting manufacturers and suppliers across the world, particularly in the US, South Korea, Taiwan and Japan.
A slowdown in infrastructure expansion could therefore affect an extensive chain of companies that have enjoyed strong growth on expectations of sustained AI investment.
Market strategists warned that the combination of crowded investment positions, leverage and uncertainty over future AI spending could amplify volatility.
There were, however, signs of stabilisation after the initial rout in Asian markets. European stock futures pared some losses, while Nasdaq futures also recovered, suggesting that some investors were looking for opportunities to buy shares after the sharp declines.
Nevertheless, the scale of the sell-off has raised questions about whether the AI investment boom is entering a more difficult phase, with political opposition to data centre expansion adding to concerns about valuations, financing costs and the commercial returns from AI.
The election outcome does not immediately change federal policy, as the newly elected Congress will take office in January. But investors are already pricing in the possibility of tougher oversight, congressional investigations and greater resistance to projects that have so far benefited from the rapid expansion of AI infrastructure.
