[U.S. Stocks] Democrats Score Biggest Win Since 2008... Nasdaq Closes Down More Than 5% on AI Regulation Fears

All three major U.S. indexes tumble
CNBC: "Entering correction territory"
Nvidia and Broadcom plunge about 10%

U.S. stocks closed sharply lower on Nov. 5 (local time) as concerns about artificial intelligence (AI) regulation spread, amid expectations that Democrats would score their biggest House victory since 2008 in the midterm elections.

The Dow Jones Industrial Average fell 1,833.06 points, or 3.44%, from the previous session to close at 51,523.06. The S&P 500 plunged 334.89 points, or 4.36%, to 7,353.73, while the tech-heavy Nasdaq Composite tumbled 1,421.51 points, or 5.52%, to finish at 24,314.99.

The New York Stock Exchange. New York, U.S. = Correspondent Hwang Yunju

Markets fell as concerns about AI regulation grew following a sweeping Democratic victory in the midterm elections. With Democrats retaking majorities in both the House and Senate and winning key gubernatorial races, concerns mounted that construction of AI data centers and infrastructure investment across the United States could slow.

In particular, independent Senator Bernie Sanders, who caucuses with the Democrats, called for a nationwide halt to data center construction. In a social media post the previous day, he said, "The American people do not want the oligarchs of Big Tech destroying the environment, eliminating jobs, and threatening the future of humanity."

Companies involved in semiconductors and data centers, which have led the expansion of AI investment, fell sharply for a second consecutive session. Nvidia and Broadcom dropped 9.19% and 10.64%, respectively, while Oracle fell 7.01%. Qualcomm reported results that beat market expectations, but its shares plunged 9.31% as its outlook for future earnings fell short of expectations.

As selling spread across the semiconductor sector, the iShares Semiconductor ETF (SOXX), which invests in major semiconductor companies, fell 12.81%. This was its biggest decline since March 2020, in the early days of the COVID-19 pandemic.

Neocloud companies that provide cloud infrastructure for AI data centers were also hit hard. CoreWeave fell 11%, while Nebius and IREN each plunged 16%. The declines reflected concerns that the Democratic election victory could spur local opposition to data center construction and efforts to tighten regulations.

Tim Holland, chief investment officer (CIO) at Orion, said, "Investors are pulling back until it becomes clear how the midterm election results will affect the AI capital expenditure cycle, which has been the biggest driver of U.S. economic growth over the past three years." He added, "The key will be the policy direction and stance taken by the party that won sweeping victories at both the federal and state levels."

Selling that began in tech stocks spread across the broader market, including industrials and financials. Construction equipment maker Caterpillar fell 6.37%, while JPMorgan Chase, the largest U.S. bank, also dropped 41.9%.

Keith Lerner, CIO at Truist Wealth, said, "Unlike the previous day, the sell-off in tech stocks has become so intense that it is now spreading across the broader market," adding, "The rubber band is getting stretched tighter and tighter."

This content was produced with the assistance of AI translation services.