Technology stocks clawed back some losses Friday, a day after investors erased more than $2 trillion in market value on fears that a newly elected Democratic Congress will crack down on artificial intelligence. The Nasdaq 100 rose 1.9% after plunging 6.3% on Thursday, its worst single-day performance in six years.
The Thursday selloff spread beyond tech. The broader Nasdaq fell more than 5%, and the Dow Jones and S&P 500 also dropped, reversing a Wednesday rally driven by relief that the midterms had not left control of Congress undecided.
Investors read the election results as a revolt against AI data centers, which many people worry will drain water and energy supplies. Democrats who promised to push back on those projects won, and Sen. Bernie Sanders called for a national data center moratorium the day after the vote.
That threatens companies such as Meta and Google parent Alphabet, which need to keep building data centers to develop the technology. David Busch, chief investment officer of Trajan Wealth, pointed to worries about tighter AI rules and resistance to new construction.
There is some concern regarding AI regulation, and fears that there could be far more regulations coming to AI technology, as well as a pushback on the buildout of data centers across the country
David Busch, chief investment officer of Trajan Wealth
Tesla and SpaceX, both controlled by Elon Musk, were among the hardest-hit stocks Thursday. Musk spent hundreds of millions of dollars in a failed bid to elect more Republicans, and investors fear his companies could draw Democratic scrutiny once the new Congress is seated in January.
Friday's bounce was uneven. Nvidia gained 7% and SpaceX rose 6.1% during trading, though neither had made up Thursday's losses, while Intel jumped 8.9% and Airbnb climbed 11.7%. Chipmakers and other stocks closely tied to AI lagged the rebound.
The pressure is not limited to Washington. Democrats who pledged to slow AI development also won state races, most prominently Gina Hinojosa in the Texas governor's race.
The rout follows an already difficult year for tech shares, as investors question whether heavy AI spending will pay off soon. AI has become a major engine of the economy, which grew at a 3.4% annual rate in the July-September quarter.
Whether the slide resumes or spreads beyond tech is unclear. Ordinary Americans hold AI stocks through 401(k)s and pension funds, leaving their savings exposed to a prolonged downturn.
