Gathering AI storm clouds doom tech stocks to darkest day in a year

Big tech stocks experienced a significant drop on Thursday, hinting at their worst decline since a previous market crash last year, marking the most serious shakeout in the AI sector during this autumn's tough period. The Nasdaq 100 index faced substantial market-value losses surpassing $2 trillion, driven by concerns that the Democratic Party's recent sweeping midterm victory could hinder AI infrastructure growth and result in a chaotic situation for smaller firms struggling to secure funding.

Rising interest rates and tighter financial conditions have already constrained the capacity of smaller firms to raise capital, particularly in areas such as semiconductors and AI infrastructure. While analysts and portfolio managers acknowledged that such declines in previously booming sectors were not entirely unexpected, given the earlier surge in stock prices and the financial worries surrounding the so-called "neoclouds" – smaller infrastructure companies like Nebius and CoreWeave – since the U.S. interest rates increased late in the summer, many believed the severity of the declines for two consecutive days signaled a shift in sentiment, potentially indicating more selling.