Stocks tumble as AI panic sweeps markets, bonds draw haven demand
A steep rout in technology stocks on Friday rippled through markets on fears that the Democrats' victory in the United States midterm elections would increase regulatory scrutiny of AI and slow the data centre build-out, sending investors to the safety of bonds.
Technology stocks suffered a sharp decline on Friday, triggering widespread panic across the markets as fears grew that the Democrats' victory in the U.S. midterm elections would impose stricter regulations on AI and hinder data center development. This led investors to seek the safety of bonds. Japan's Nikkei index plummeted by 6%, its steepest one-day loss since April 2025, while South Korean and Taiwanese indices fell by over 8% shortly after the opening bell, recovering slightly as authorities attempted to halt the selling.
Volatility fear rose on Wall Street, the Nasdaq suffered a 5.5% drop, and the S&P 500 shed $3 trillion in value, with investors apprehensive about Democrats potentially throttling the AI boom. Christopher Forbes, head of Asia and Middle East at CMC Markets, remarked, "It's actually a bit of a disaster. Clients were long index, long stocks, and they all got carried away."
The political uncertainty surrounding AI investment was exacerbating the situation, already weakened by concerns over the returns on substantial AI-related infrastructure spending. Dong Baozhen, chairman of asset manager Lingtong Shengtai, noted that the AI stock market had been built on unrealistic expectations, and now those expectations had vanished.
The market downturn indicated that AI stock prices had relied on optimistic assumptions about the future, which have now proven untenable. Despite the steep decline, some analysts were skeptical about the severity of the downturn, suggesting that the market bottom may be closer than it appears.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
