Analysts and investors react to AI market rout

Stock markets experienced a significant decline on Thursday as investors grew fearful about potential regulation and a slowdown of the AI boom following the Democratic victory in the midterm elections. The Nasdaq dropped by 5.5%, its largest drop since a similar rout in 2025. Trading halted on the Seoul and Tokyo stock exchanges, with stocks plunging 8% and 6%, respectively.

Chief Economist and Head of Investment Strategy at AMP, Shane Oliver, stated that investors were struggling to understand the implications of the Democratic win, noting that tech and AI-related trades were trading on high multiples, making them vulnerable. George Boubouras from K2 Asset Management in Melbourne emphasized that the AI and tech selloff was now accelerating due to concerns over potential impacts on the US data center rollout following the midterms.

Charu Chanana from Saxo in Singapore warned against interpreting the Democrats' victory as a defeat for AI, as both parties continue to see AI leadership as a strategic priority. Michael McCarthy, CEO of MooMoos Australia and New Zealand, noted a shift in market sentiment, with selling becoming more violent as investors unwound their positions simultaneously.

Mark Fuchs from Fuchs Capital Partners in Singapore suggested that the Democrats' more measured approach to data centers and AI might lead to a reduction in spending, while Asia tech markets were being repriced downward due to concerns over potential demand constraints and higher cost of capital.