Global stocks plunge for a second day as AI slowdown fears spread

Asian and European markets fell sharply on Friday as a Wall Street tech rout spread across global trading, with investors reacting to fears that spending on artificial intelligence and data centres could slow after the Democrats' midterm victory. The FTSE 100 opened down 1.5%, while Germany's Dax, France's Cac 40 and Spain's Ibex also moved lower. The declines followed a severe sell-off in US technology shares on Thursday and extended the pressure into the next trading session.

The Nasdaq had its worst day in 19 months, falling 5.5%, while chip and storage stocks led the losses. SanDisk dropped 22% and Western Digital fell 17% as investors reassessed the outlook for companies tied to AI infrastructure. Market volatility also rose sharply, with Wall Street's Vix jumping 61% to its highest level since the early weeks of the Iran war.

In Europe, the weakness was broad-based at the open. AstraZeneca was among the biggest fallers in London, while IAG, Antofagasta and Anglo American also declined. In Asia, Japan's Nikkei 225 fell 6% and South Korea's Kospi dropped more than 8% in early trading.

Analysts said the move reflected concern that the build-out of datacentres could slow, threatening the spending that has underpinned the AI investment boom. The sell-off matters because technology shares have been a major driver of global equity gains this year, and the latest move shows how quickly sentiment can reverse when policy and profit expectations shift. The reaction also underlines the scale of capital now tied to AI-related infrastructure, from chips and cloud services to power-hungry data centres.

Any sign of slower approvals or tougher regulation can therefore affect markets far beyond the United States. The political backdrop has become central to the market reaction. Investors are weighing the possibility that the midterm result could lead to greater scrutiny of data centre development, after some winning candidates pledged to curb such projects.

Calls from Senator Bernie Sanders for a national moratorium on data centre construction have added to the uncertainty, even as many companies have already committed large sums to the sector. What remains unclear is how far any policy changes would go and whether election pledges will become legislation or regulatory action. Investors will be watching for further signals from Democratic lawmakers and for any response from companies exposed to AI infrastructure spending.

The key question now is whether the losses spread further across global markets or stabilise as the policy outlook becomes clearer.

Asian technology shares fell sharply on Friday after a Wall Street sell-off triggered by fears that Democrats' victory in this week's US midterm elections could lead to tighter regulation of artificial intelligence. Trading in Seoul and Tokyo led the declines, with investors moving away from a sector that had helped push markets to record highs earlier this year. The sell-off also reflected concern that political pressure on data centre development could slow the pace of AI investment.

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The immediate market reaction followed a broad drop in US equities, where the Nasdaq fell 5.5% in its worst percentage decline since April last year. The S&P 500 lost more than 4%, while the Dow fell by more than 3%. Analysts said investors were reassessing the scale of spending already committed to AI infrastructure and the time it may take for those investments to generate returns.

Rising borrowing costs have added to those concerns. The political backdrop is central to the move. Many of the winning candidates in the midterm elections had pledged to curb data centre development, reflecting opposition to such projects from voters across the political spectrum.

Investors were also unsettled by calls from progressive US Senator Bernie Sanders for a national moratorium on data centre construction. The combination of election results and policy uncertainty has raised questions about how quickly the AI buildout can continue. The sell-off matters because the technology sector has been one of the main drivers of global equity gains in recent months.

Companies linked to chips, cloud computing and data infrastructure have attracted large amounts of capital on expectations of continued demand for AI services. Any sign of tougher regulation or slower approvals for new facilities could affect valuations well beyond the United States, given the sector's global supply chains and cross-border investor base. The reaction also highlights how closely markets are now tied to the politics of AI.

Data centres have become a flashpoint because they require large amounts of land, power and financing, and have drawn criticism from communities and politicians concerned about their local impact. That opposition has now intersected with a broader debate over how governments should regulate AI development, making the sector more vulnerable to policy shifts after elections. What remains unclear is how far any new US restrictions would go, and whether campaign pledges will translate into legislation or regulatory action.

Investors will be watching for further signals from Democratic lawmakers, as well as any response from companies that have committed billions of dollars to AI infrastructure. Market participants will also be looking to see whether Friday's losses spread further across global technology shares or stabilise as the policy picture becomes clearer.

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