Brutal sell-off for AI stocks sends Wall St reeling

A severe sell-off engulfed Wall Street on Thursday, triggered by stocks associated with the development of AI data centers. This dramatic decline nearly wiped out the previous day's substantial gain in the US stock market, which had been its best performance in three months. The S&P 500 plummeted 4.4 percent, marking its worst day since US President Donald Trump imposed tariffs in April 2025, then known as "Liberation Day" tariffs.

The Dow industrials slipped 3.4 percent, while the Nasdaq suffered an even sharper decline of 5.5 percent. The Nasdaq, predominantly composed of AI-related and other tech stocks, plummeted 11.9 percent below its previous all-time high, set in the prior month. Financial analysts classify a loss exceeding 10 percent as a "correction."

Global stock markets faced pressure from ongoing drops in companies that profited from the rapid expansion of the artificial intelligence technology sector. South Korea's Kospi index also suffered, falling 5.3 percent. These stocks have been fluctuating for months due to concerns over potential slowdowns in AI data center construction, driven by the increasing cost of borrowing money.

Critics argue that AI stock prices were inflated and were in a bubble. The recent US midterm elections added further uncertainty, as victories by Democrats could potentially lead to restrictions on AI data center construction. Public opinion, spanning various political affiliations, expressed skepticism towards AI and concerns over rising power bills resulting from data centers.

Any deceleration in AI data center construction would result in reduced purchases of AI chips, as well as electricity and other products and services benefiting from the AI frenzy, which has been a significant driver of US economic growth. Nvidia, the chip company that rapidly became the symbol of the AI boom, declined 9.3 percent and is now down 2.6 percent for the year, following annual gains of 39 percent, 171 percent, and 239 percent in the past three years.

Advanced Micro Devices (AMD) plummeted 17.3 percent. CoreWeave, a company offering cloud access to AI chips, fell 9.8 percent. GE Vernova, which assists in powering data centers, also saw a 7.5 percent decline. The Nasdaq dropped 5.5 percent, reaching 24,315, while the S&P 500 fell 4.4 percent, settling at 7,353, and the Dow industrials declined 3.4 percent, closing at 51,523.