Nasdaq’s 5.5% plunge sends tech stocks tumbling worldwide
Fears that a Democratic Congress will slow AI data centre building wiped trillions off tech shares, with Japan and South Korea hit harder than Europe.
By
Ellis Marwood
In brief
- The Nasdaq lost an estimated $2.5tn in market value on Thursday and entered correction territory.
- Nvidia fell more than 9%, while the Nikkei and Kospi each closed down 6% on Friday.
- European indexes fell less sharply because they hold fewer tech stocks.
- Despite the slump, the Nasdaq is still up about 4.6% since the start of the year.
A rout in US technology shares on Thursday spread to Asia and Europe on Friday, as investors reacted to the Democrats’ midterm victory and the prospect of tougher rules on the data centres that power artificial intelligence.
How Wall Street’s Thursday rout unfolded
The slide pushed the Nasdaq into what traders call correction territory, meaning it now sits at least 10% below its recent high. According to BBC News, the so-called magnificent seven tech companies, including Apple, Nvidia and Tesla, together shed a trillion dollars in a single session.
Elon Musk’s companies were hit too. SpaceX shares fell 8% and Tesla’s nearly 11%, taking more than $300bn off their combined market value.
Chip stocks led the way down. SanDisk tumbled 22% and Western Digital 17%, while the Vix, Wall Street’s “fear index”, jumped 61% to its highest level since the early weeks of the Iran war.
Why investors panicked
Democrats campaigned across the US on slowing the growth of data centres and AI, and dozens of ballot measures sought to restrict them. They won both the Senate and the House, taking control of Congress for the rest of Donald Trump’s presidency.
Dan Coatsworth, head of markets at AJ Bell, said: “The midterm election result muddied the waters as the Democrats now have more influence and could slow down the pace of data centre roll-outs and look at new ways to regulate the sector,”. He added that investors were also uneasy about the huge sums being spent on AI, with no clear idea of when the payback will come.
Susannah Streeter, chief investment strategist at Wealth Club, put it this way: “Big worries are colliding, the build-out of datacentres looks set to slow, which risks shredding the spending spree underpinning the boom, right at the time that investors have become super nervous about returns on this massive investment.”
Senator Bernie Sanders, a Democrat, called on X for a national data centre moratorium. Trump blamed the slide on his opponents, writing that it “wasn’t Republicans, it was Dumocrats”, but on Friday he restated his support for the AI sector. Some tech leaders say the backlash caught them off guard: OpenAI’s Greg Brockman said more work was needed to bring communities on board.
Asia and Europe follow
| Market | Friday move |
|---|---|
| Japan’s Nikkei | Closed down 6% |
| South Korea’s Kospi | Down more than 8% at one point, closed down 6% |
| UK FTSE 100 | Down nearly 2%, or 207 points to 10,575 in mid-morning trading |
| Germany’s Dax | Down 1.9% in morning trading |
| France’s Cac 40 | Down 1.5% in morning trading |
| Spain’s Ibex | Down 1.1% in morning trading |
In Japan, memory chip maker Kioxia and Tokyo Electron were among the big fallers. In Seoul, the Kospi’s early plunge triggered a circuit breaker, the mechanism that halts trading to curb panic selling, and SK Hynix fell more than 10%.
European declines were milder because those indexes contain fewer tech stocks. The FTSE 100 was nonetheless poised for its worst day since March. Copper on the London Metal Exchange was set for its biggest weekly fall since March, down 2.79% on the week.
Still up for the year, but warnings remain
Even after the losses, the Nasdaq is up about 4.6% since the start of the year, and the FTSE 100 has gained almost 6.9% in 2026, though it sits more than 300 points below its July record.
Mohit Kumar, an economist at Jefferies, said he did not see the fall as the start of an unwinding of the AI trade: “AI investment has been a key driver of US growth and we do not see the Democrats as giving up on this growth engine.” He did not expect a quick rebound in the US.
“Yesterday’s brutal session marked a dramatic turnaround from Wednesday, but with AI fears still prominent there is a risk that there is much more selling to come.”
Chris Beauchamp, chief market analyst at IG
Beauchamp added that investors were also watching for a possible resumption of the Iran conflict and the oil price after its slump earlier in the week.
Photo: Rafael Minguet Delgado / Pexels
