Tech stocks battered as AI panic roils global markets

Technology stocks faced significant losses on Friday as investors feared increased regulatory oversight of artificial intelligence projects under a potential Democrat-led US Congress. Malaysia's Bursa Malaysia also saw a drop in technology stocks due to concerns about the Democrats' impact on AI and a slowdown in data center construction.

The Nasdaq index fell 5.5% or 1,421 points, marking its worst performance in 18 months, while the Dow Jones fell 3.4% or 1,833 points. This volatility caused Wall Street's "fear gauge" to spike, as investors worried about possible regulations slowing the AI boom. The AI-related trade faced further uncertainty due to doubts about the return on massive spending in AI-infrastructure.

The Technology Index on Bursa Malaysia fell as much as 6.4%, making it the worst-performing sectoral index, before recovering slightly. Among the biggest losers were automation equipment manufacturer Pentamaster Corp Bhd and AI semiconductor assembly and test service provider Inari Amertron Bhd. While some stocks recovered from their steep losses, research houses noted that the sharp decline in tech stocks was primarily driven by sentiment and valuation rather than a structural decline in AI demand.

However, analysts warned that regulatory and infrastructure delays could lead to a significant valuation reset for tech stocks in the near future.