Elon Musk’s SpaceX experienced a drop of more than nine per cent in its share value on Thursday as artificial intelligence and technology stocks faced intense selling pressure following the sweeping victory of Democrats in the United States midterm elections.
According to the BBC, the sell-off dragged the tech-heavy Nasdaq Composite index lower, with losses exceeding five per cent at one point during early trading. The market reaction has been linked to concerns about possible tougher scrutiny of data centre construction and the artificial intelligence industry after Democratic victories in key states, including Texas.
SpaceX shares were down more than nine per cent by lunchtime on Thursday, while Tesla stocks dropped by over 11 per cent. The declines came amid renewed questions about the political and regulatory environment for major technology companies.
Musk had spent nearly $450m backing Republican campaigns, including at least $45m in support of Ken Paxton’s bid for a Texas Senate seat. However, Texas swung to the Democrats in Tuesday’s election, adding to concerns among investors about the future of data centre projects in the state.
Texas governor-elect Gina Hinojosa campaigned strongly against data centres, pledging to impose a moratorium on new construction in the sector.
The downturn also affected major chipmakers. Advanced Micro Devices (AMD) shares fell more than 14 per cent, while Micron dropped by as much as 17 per cent before recovering slightly.
Intel shares declined by more than seven per cent, while Nvidia lost nearly nine per cent. The Philadelphia Semiconductor Index also fell by 10 per cent.
The broader sell-off extended to the S&P 500, which was down 3.8 per cent by lunchtime.
Susannah Streeter, chief investment strategist at Wealth Club, said the sharp losses on the Nasdaq and S&P 500 were sending shockwaves through other markets.
“Fresh panic over the AI trade has hit Wall Street hard,” she said.
“Fears that the vast sums poured into AI infrastructure may not deliver the returns investors have been banking on are now colliding with the prospect of a sharp slowdown in data centre construction.”
The election results have also prompted technology executives to acknowledge the need for better engagement with communities over data centre developments and the wider benefits of artificial intelligence.
OpenAI president and co-founder Greg Brockman said the industry had been surprised by the strength of the backlash against data centres and needed to do more to secure public support.
“A lot of our shift over the course of this year has really been to realise that from San Francisco trying to build infrastructure in Texas, Georgia, and other places, you can’t just tweet and say: ‘This is going to be good.’ You need to be in those communities,” Brockman said at the Wall Street Journal Tech conference in Napa, California, on Wednesday evening.
Meta president Dina Powell McCormick also acknowledged that technology companies needed to improve how they communicate the benefits of artificial intelligence.
“I think we need to double and triple down on telling the story,” she told the conference.
Beyond the immediate political impact of the midterm elections, investors have also grown increasingly concerned that artificial intelligence stocks may be in a bubble and could be approaching a market correction.
What You Should Know
Tech stocks, including shares in SpaceX and Tesla, experienced a sharp downturn after the Democrats won the US midterm elections, raising regulatory concerns over artificial intelligence and data centre developments.
- Potential Risks: Investors are growing worried that massive spending on AI infrastructure might not yield expected returns, while potential new regulations could slow down major construction projects.
- Market Impact: Major chipmakers and tech giants also saw significant share price drops, reflecting growing anxiety over a possible market correction in the technology sector.
