Introduction: Global stocks tumble as AI panic grips markets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Fears that the Democratic Party’s blue wave in this week’s midterm elections will sink the AI investment boom are roiling markets, following heavy losses on Wall Street last night.
Asia-Pacific markets are a sea of red (unlike the US election map on Tuesday night!), as investors ditch tech stocks after more than $3.2tn was wiped off the US stock market yesterday.
Today, Japan’s Nikkei stock index has slumped by almost 6% – its worst drop since April 7 2025 during the ‘liberation day’ tariff panic.
South Korea’s KOSPI is down 6.7%, and Taiwan’s TAIEX has dropped by 4.5% in a broad rout.
Christopher Forbes, head of Asia and Middle East at CMCMarkets, called the market action “a bit of a disaster”, explaining (via Reuters):
“(Clients) were long index, long stocks, and they all got carried out.
“All night, all day – we had client margin calls, client complaints, ... because it’s a very emotional thing, right? People are wedded to their positions and views on a stock or outcome and you’re telling them, look, you’ve just lost money.
“And it’s not just a slap in terms of valuation. It’s basically a whole policy and six-year structural shift that says we’re now going to pause, we’re now going to cool AI, we’re now going to cool data centres, approvals and equity capital markets.”
After months of warnings that AI valuations were too high, and that the bubble might burst, US investors dashed to the exits en masse yesterday. The Nasdaq tech index slumped by 5.5%, while the DowJonesIndustrialAverage(DJIA) dropped 1,833.06 points, or 3.44%, and the S&P 500 lost 4.36%.
Memory chip makers, who had been profiting from the AI boom, led the fallers – SanDisk slumped 22% and both Micron and AMD lost 17% of their value.
Chip giant Nvidia led the fallers on the DJIA, down over 9%.
Analysts pointed to policy uncertainty as Democrats are more critical of data centres, which could slow the rollout of AI investment – especially given public opposition to the sector.
Kyle Rodda, senior financial market analyst at Capital.com, says it was a “brutal sell-off” as fears about the future of the AI buildout gripped the markets.
The tumble in tech stocks that took hold in the immediate aftermath of the US midterm elections resumed as investors contemplated what a Democrat-controlled Congress may mean for tech regulation and the overall AI boom.
The regulatory and political risks arise at a time when the proverbial AI trade was already on shakier foundations. Earnings season has been an overall disappointment for the markets, with Magnificent Seven results so far undershooting growth expectations and flashing warning signs that the pace of AI spending is slowing down.
So, it could be a ‘tin hats on’ day in the markets. Investors will also be watching the latest US jobs report, for clues into the health of America’s labour market.
The agenda
7am GMT: Lloyds house price index
9am GMT: UN’s FAO food price index
1.30pm GMT: US non-farm payrolls jobs report
3pm GMT: University of Michigan’s US consumer confidence report