US tech stocks plunge on fears of tighter AI regulation by Democrats
Fears of tighter regulation of artificial intelligence (AI) triggered a sharp sell-off in US technology stocks on Thursday, two days after Democrats scored resounding victories in congressional elections.
Shares in the semiconductor industry were particularly hard hit, having until recently been among the biggest beneficiaries of the AI boom. But the sell-off also spread to the broader market, as investors fled equities and shifted money into government bonds, traditionally seen as a safe haven.
The tech-heavy Nasdaq 100 plunged 6.36% to 26,629.81 points, falling to its lowest level since April and wiping $2.3 trillion off its market value.
The index had surged since the beginning of 2023 on expectations of strong business growth driven by AI, reaching a record high as recently as October. Despite Thursday’s losses, it remains up 5.5% since the start of the year.
S&P 500 and Dow Jones slip
The broader S&P 500 tumbled 4.36% to 7,353.73 points, its biggest daily decline since April 2025. The Dow Jones Industrial Average dropped 3.44% to 51,523.06 points, although it remains up 7.2% since the beginning of the year.
The sell-off came after Democrats secured majorities in both the House of Representatives and the Senate in Tuesday’s elections, raising the prospect of greater scrutiny of the technology sector.
For instance, tech firms could face increased opposition to the construction of vast data centres needed to power AI systems. Democrats are generally seen as more sceptical of the rapid expansion of AI than Republicans, who have largely advocated deregulation.
In Texas, Democratic governor-elect Gina Hinojosa has already called for an immediate moratorium on the construction of new data centres.
Critics of AI data centres have raised concerns about their high electricity consumption, which could also push up energy prices for households. Other concerns include noise, air pollution and water shortages, as well as fears that data centres will create relatively few permanent jobs.
Chipmakers under pressure
Against this backdrop, Nvidia shares fell 9.3%, making the stock the worst performer on the Dow. Memory chipmakers Seagate, Western Digital and Sandisk fared even worse, plunging by as much as 22%.
Their products are essential components of data centres.
Fears of tougher regulation more broadly also rattled investors in companies owned by tech billionaire Elon Musk. Shares in electric carmaker Tesla fell nearly 11%, while those in space and AI company SpaceX dropped 9%.