Technology and artificial intelligence stocks fell sharply the day after Democrats won a landslide victory in the U.S. midterm elections, with SpaceX stock down more than 9% and Tesla shares declining more than 11% by midday Thursday. The selloff pushed the Nasdaq Composite Index down more than 5% at one point in early trading as investors weighed the possibility of increased scrutiny of data center construction and the AI industry.
Markets are reacting to Democratic victories in key data center states, including Texas. The election results have raised concerns that new political opposition could slow data center development, while some technology leaders have acknowledged that the industry needs to do more to explain the benefits of AI infrastructure to local communities.
Election results intensify data center concerns
Elon Musk has spent nearly $450 million supporting Republican campaigns, including at least $45 million to help Ken Paxton win a Texas Senate seat. However, Tuesday night’s Democratic tsunami turned Texas deep blue.
Texas Governor-elect Gina Hinojosa has mounted a fierce campaign against data centers and has promised a moratorium on new construction in the area.
The political shift comes as investors are already questioning whether the enormous sums being invested in AI infrastructure will produce the returns they expect. Some investors fear AI stocks may be in a bubble that is about to correct.
Chip stocks also fall sharply
Chipmakers were among the companies hit hardest during Thursday’s selloff. AMD shares fell more than 14%, while Micron stock dropped as much as 17% before recovering slightly.
Intel stock declined more than 7%, Nvidia fell nearly 9%, and the Philadelphia Semiconductor Index dropped 10%. The broader decline also affected the S&P 500, which was down 3.8% by lunchtime.
Susannah Streeter, chief investment strategist at Wealth Club, said the sharp decline in the Nasdaq and S&P 500 had sent shockwaves through other markets.
“A new panic around AI trading is hitting Wall Street hard,” she said.
“Concerns that the huge sums of money poured into AI infrastructure will not yield the returns investors had hoped for are colliding with the prospect of a sharp slowdown in data center construction.”
Technology leaders acknowledge communication gap
Some technology executives said they were caught off guard by the backlash against data centers during the midterm elections.
Greg Brockman, president and co-founder of OpenAI, said the reaction to data centers had surprised everyone and that the industry needed to do more to build understanding in local communities.
“A lot of our change this year was realizing that we can’t just tweet and say, ‘This is going to work,’ as San Francisco is building infrastructure in Texas and Georgia and other places. We need to be involved in those communities,” Brockman said Wednesday night at the WSJ Tech conference in Napa, California.
Dina Powell McCormick, president of Meta, also said the industry must improve how it communicates the benefits of AI.
“I think we need to double and triple our storytelling,” she said at the WSJ conference.
Source: www.bbc.co.uk