US stock indices gave up Wednesday’s election rally on Thursday 5 November, Yahoo Finance and the BBC reported. The Democrats won both the House of Representatives and the Senate in Tuesday’s midterm elections.

The Dow Jones Industrial Average fell 3.4 per cent, or more than 1,800 points. Yahoo Finance’s summary put the S&P 500’s fall at 4.3 per cent, while the BBC and Yahoo Finance’s own live coverage put it at 4.4 per cent. The Nasdaq Composite fell 5.5 per cent and closed in correction territory, at least 10 per cent below its recent peak.

The narrower Nasdaq-100 fell 6.3 per cent and lost $2.3 trillion in market value, Yahoo Finance reported. The BBC, citing Dow Jones data, said the Nasdaq Composite lost an estimated $2.5 trillion. The figures refer to different indices.

Chip companies fell most

The PHLX Semiconductor index (SOX), which the BBC said tracks 30 large semiconductor companies, fell 12 per cent.

The sources give different figures for Nvidia’s fall. Yahoo Finance’s price table shows 6.8 per cent; the BBC put it at more than 9 per cent and said the company lost more than $400 billion in market value. AMD and Micron fell more than 17 per cent, the BBC said.

AMD chief executive Lisa Su told Yahoo Finance that, in Su’s view, demand for AI chips is not slowing. Markets can sometimes be a little short-sighted, Su said.

Data centre fears and profit-taking

Democrats campaigned in many races to curb the growth of data centres and AI, the BBC reported. Dozens of proposals to restrict data centre construction were on the ballot. Texas’ Democratic governor-elect Gina Hinojosa pledged during the campaign to halt construction of new data centres. Charu Chanana, chief investment strategist at Saxo, told the BBC that tighter permitting could delay projects and raise the industry’s costs.

Elon Musk’s SpaceX fell 8 per cent and Tesla almost 11 per cent, the BBC said. Investors worry that regulation could slow data centre projects and a possible merger of the companies, Yahoo Finance reported.

Nomura strategist Charlie McElligott sees the main cause elsewhere. Yahoo Finance reported McElligott’s view that the fall stems not from a sudden deterioration in company fundamentals but from a rush by hedge funds to lock in the year’s profits before year-end. Selling of the year’s favourite stocks has been brutal for more than a month, McElligott said. Lam Research has fallen 36 per cent in a month and Applied Materials 30 per cent, Yahoo Finance said. The BBC also linked the fall to persistent doubts about whether the vast sums spent on AI will pay off.

Sell-off spreads to Asia

Asian markets fell sharply on Friday morning, the BBC reported. Japan’s Nikkei 225 was down 6 per cent in early trading. South Korea’s Kospi fell more than 8.5 per cent, triggering a temporary trading halt. Taiwan’s Taiex fell more than 8.3 per cent. Among chipmakers, SK Hynix fell more than 11.5 per cent, Samsung almost 10 per cent and TSMC almost 8.5 per cent.