Sweeping Democratic victories at both national and state levels triggered Thursday's broad Wall Street retreat, resulting in the Nasdaq falling by more than 5%. Investor panic focused largely on voter backlash against resource-heavy data center projects, casting doubt on key growth initiatives for tech giants like Meta and Alphabet. The sell-off also hit Elon Musk's Tesla and SpaceX amid expectations of heightened congressional oversight starting in January. This policy uncertainty places pressure on an industry that recently powered a 3.4% annual economic growth rate.
Key points
Expanding voter backlash over the heavy water and energy consumption of data centers thre…: Expanding voter backlash over the heavy water and energy consumption of data centers threatens major tech firms.
Economic risks may extend beyond Wall Street because artificial intelligence drove a 3.4%…: Economic risks may extend beyond Wall Street because artificial intelligence drove a 3.4% annual growth rate last quarter.
Prolonged downturns in the technology sector jeopardize everyday Americans holding compan…: Prolonged downturns in the technology sector jeopardize everyday Americans holding company shares through 401(k) accounts and pension funds.
Sources checked by our analysis pipeline: 1
Two days after Democrats won overwhelmingly in the national midterm elections — and in state races across the country — investors started to come to terms with the potential consequences.
Fears that an incoming Democratic Congress would crack down on AI sent the tech-heavy Nasdaq down more than 5% and wiped out more than $2 trillion in market value. The Dow Jones and S&P also sank.
The losses were a stark reversal from Wednesday, when investors had initially sent shares higher across the board, relieved that the midterms did not end with the fate of Congress undecided.
The sobering-up seen across markets on Thursday reflected investors' concern about a big signal sent by voters: They revolted against AI data centers, which many people worry will gobble up water and energy resources. Those voters supported Democrats who have vowed to push back against the proliferation of these projects.
But many AI companies — including Meta and Alphabet, the parent company of Google — need to keep building out these data centers to continue developing the technology.
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