US stocks, which had been setting record highs amid enthusiasm for artificial intelligence investment, fell sharply in a single day. Concerns over tighter AI industry regulation and weaker data center investment spread after Democrats gained control of Congress in the US midterm elections. Additional caution that AI companies' massive capital spending could slow more than expected contributed to the loss of about $3.2 trillion, or approximately 4,288 trillion won, in US stock market capitalization. On November 5, local time, the technology-heavy Nasdaq Composite closed at 24,315.00, down 1,421.52 points, or 5.52%, from the previous session. The Dow Jones Industrial Average fell 1,833.06 points, or 3.44%, to 51,523.06, while the Standard & Poor's 500 index declined 334.89 points, or 4.36%, to 7,353.73. The Nasdaq and S&P 500 recorded their largest declines since April 2025, when US President Donald Trump's reciprocal tariff announcement shook the market. The Nasdaq entered a technical correction after falling more than 10% from its record high in October. Market sentiment had been the opposite just a day earlier. Major indexes had all risen on expectations that Democratic control of Congress would resolve political uncertainty, but they gave back those gains in a day as potential negative effects on the AI industry came into focus. Investors concentrated on the possibility of restrictions on data center construction. Concerns about tighter regulation grew as Democratic candidates advocating a halt to new data center construction and a slower pace of advanced AI development won seats in Congress. Democratic electoral gains in areas with concentrated data center industries, including Texas and Georgia, added to the unease. Delays in data center construction could weaken demand not only for AI semiconductors and servers but also for power equipment, cooling systems and cloud services. UBS estimated that construction suspensions and related disruptions could affect about 30% of the US data center capacity expected to be added in 2028. Questions also resurfaced about whether enormous AI investments can generate actual returns. Analysts said market concerns over investment profitability had increased as major technology companies expanded external borrowing, including bond issuance, to fund data center and semiconductor investments while high interest rates continued to weigh on them. Selling was concentrated in AI semiconductor stocks. Nvidia fell 9.3%, AMD 17.3%, Micron 17% and Broadcom 10.6%. Qualcomm also declined 9.5%. The Philadelphia Semiconductor Index plunged more than 12%, its largest decline since the early stages of the COVID-19 pandemic in 2020. Neocloud companies that rent out AI computing resources and data center operators were also hit. GE Vernova, a supplier of data center power equipment, fell 7.5%, as concerns over weaker AI investment spread from semiconductors to power and industrial stocks. Tesla and SpaceX, led by Elon Musk, fell 10.8% and 9.1%, respectively. The declines would reflect concerns that the Democratic victory could increase regulatory and political pressure on both companies after Musk spent heavily to support Republican candidates in the midterm elections. During the sell-off, hedge funds also sold substantial stock holdings to reduce risk exposure. Analysts said selling pressure increased as even investors who had been buying at lower prices moved to raise cash. Meanwhile, stronger demand for safe-haven assets pushed the US 10-year Treasury yield down from 4.90% the previous day to 4.84%. In oil markets, Brent crude rose 3.9% as uncertainty surrounding the Iran war resurfaced. Ted Parkhill, chief executive of Incline Investment Management, said, “The market is shifting from AI's potential to its valuation,” adding, “There is no doubt that AI is a technology that will change the world over the long term, but that does not mean the current price of every AI-related stock is justified.” Parkhill added that “substantial volatility is expected to continue.”
Original Korean article: ETNews
English brief by Korea Wind Intelligence, koreawindintel.com
