Trump’s crushing midterm defeat has already led to a $2.5 trillion consequence

Wall Street’s enthusiasm for artificial intelligence has helped push technology stocks to extraordinary heights, with investors pouring billions into companies promising to transform everything from computing to global infrastructure.

For months, the prospect of an AI-driven economic revolution has been enough to justify enormous spending commitments, ambitious construction projects and increasingly expensive stock valuations.

But according to Reuters, tnvestors are now confronting a rather less glamorous question: What happens when political opposition, rising costs and financial reality catch up with the industry’s ambitions?

The answer arrived with considerable force on Thursday.

Following the Democrats’ sweeping victory in the US midterm elections, American technology stocks suffered their most severe daily decline since Donald Trump’s so-called Liberation Day tariff announcement in April 2025.

The Nasdaq 100 plunged 6.4%, erasing approximately $2.5 trillion in market value, according to Reuters.

The broader Nasdaq Composite fell 5.5%, with investors increasingly concerned that Democratic gains could make it harder for technology companies to expand the enormous data centers powering the AI boom.

For an industry accustomed to seemingly endless optimism, the sudden change in mood was difficult to ignore.

Trump’s election defeat triggers fresh fears on Wall Street

The Democrats’ decisive midterm victory has raised questions about the future of America’s rapidly expanding AI infrastructure.

Investors are particularly concerned about the party’s success in gubernatorial elections, which could strengthen political opposition to new data center developments.

Although the federal government plays an important role in technology policy, state and local authorities have considerable influence over construction permits, environmental requirements and infrastructure planning.

The election results have therefore introduced another layer of uncertainty for companies investing billions in new facilities.

Michael O’Rourke, chief market strategist at JonesTrading in Connecticut, believes the political implications could extend well beyond Thursday’s selloff.

“The big election outcome was, especially with the Democrats winning a lot of the governorships, that the slowdown of the data center buildout is the real key theme that’s going to stick,” he told Reuters.

The concern is particularly significant because AI companies depend on rapid infrastructure expansion to meet their projected demand for computing power.

Without sufficient data center capacity, some of the industry’s ambitious growth expectations could become increasingly difficult to achieve.

Investors appear to be taking that possibility seriously.

Thursday marked the Nasdaq Composite’s second consecutive day of AI-related selling and its fifth decline exceeding 500 points since mid-October.

The index has now fallen nearly 12% from its record closing level on October 6, placing it firmly in correction territory.

Financial markets generally define a correction as a decline of at least 10% from a recent peak.

Nvidia and AMD suffer massive losses

The most dramatic selling hit companies that have benefited directly from the AI investment boom.

Semiconductor manufacturers, whose chips power increasingly sophisticated artificial intelligence systems, were among the biggest casualties.

Nvidia, one of the most prominent beneficiaries of the technology’s rapid expansion, saw its shares plunge 9%.

Advanced Micro Devices suffered an even steeper decline, losing 17% of its market value during Thursday’s session.

The Philadelphia Semiconductor Index fell 12%, reaching its lowest level in more than six months.

Such sharp declines reflect concerns that the pace of spending on AI infrastructure could slow considerably if new projects face political or financial obstacles.

The weakness was not limited to semiconductor manufacturers.

Amazon and Google’s parent company Alphabet each declined 2.2%, despite having initially resisted the previous day’s technology selloff.

Microsoft also suffered losses, with its shares falling 3.6%.

The broad nature of the decline suggested investors were reconsidering their exposure to the entire AI ecosystem rather than simply abandoning a handful of struggling companies.

Wall Street’s VIX volatility index, often described as the market’s fear gauge, recorded its largest increase since December 2024.

America’s AI expansion faces resistance from local communities

Much of the concern revolves around the enormous physical infrastructure required to support artificial intelligence.

Modern AI data centers consume substantial amounts of electricity and can place significant demands on local water supplies.

Their construction also requires extensive investment in power generation, transmission networks and supporting infrastructure.

As more facilities are proposed across the United States, some communities have begun questioning whether the economic benefits justify the environmental and infrastructure costs.

Bruce Zaro, managing director at Granite Wealth Management in Massachusetts, warned that obtaining permission for new developments could become increasingly difficult.

“There’s going to be a lot of pushback about those data centers being geographically located in someone’s backyard, straining the power grid, straining the water systems,” he told Reuters.

“Although there are a number of data centers already approved, there are still a lot to be permitted. There’s going to be a difficult road to get those permitted forthcoming.”

The potential consequences are substantial.

Analysts at UBS estimate that approximately 30% of the additional US data center capacity expected in 2028 could be vulnerable to construction pauses.

Such delays would create serious challenges for companies whose business models depend on rapidly increasing computing capacity.

They could also affect electricity providers, construction contractors and equipment manufacturers that have benefited from the AI infrastructure boom.

The election results have not automatically halted any of these projects, but investors are increasingly pricing in the possibility of slower approvals and additional scrutiny.

Smaller AI companies face an even bigger problem

While established technology giants have the financial resources to absorb some disruption, smaller AI infrastructure companies face a considerably more difficult situation.

Many have borrowed heavily or relied on outside investment to finance the expensive facilities needed to compete in the rapidly expanding market.

Higher interest rates and tighter financial conditions have already made that strategy more challenging.

The prospect of construction delays adds another source of risk.

CoreWeave, a company specializing in cloud computing infrastructure for AI workloads, lost 10% of its share value on Thursday.

The company’s five-year credit default swap spread climbed to a record 1,267.9 basis points, according to S&P Global Market Intelligence.

Credit default swaps are financial instruments used to insure against potential debt defaults, and rising spreads generally indicate that investors perceive greater credit risk.

Intel’s equivalent spread also reached a record, climbing to 149.7 basis points.

Meanwhile, fellow AI cloud infrastructure company Nebius plunged 15%.

Both CoreWeave and Nebius have lost at least half their share value since the Nasdaq Composite reached its record high on October 6.

The losses demonstrate how quickly investor confidence can deteriorate when companies with ambitious expansion plans face questions about financing and profitability.

Other businesses involved in data center development suffered similarly severe declines.

Applied Digital, Cipher Digital and IREN each fell more than 14%.

The AI boom is facing an expensive reality check

Political concerns may have accelerated the selloff, but analysts say the industry’s financial challenges were already becoming increasingly apparent.

Technology companies have committed enormous sums to developing AI models, purchasing advanced chips and constructing the infrastructure needed to operate them.

Those investments have helped support impressive stock market gains, particularly among companies supplying the necessary computing equipment.

However, questions about whether the spending will generate sufficient profits have become harder to dismiss.

Ted Parkhill, founder and chief executive of Incline Investment Management, believes investors are beginning to reassess the relationship between AI’s potential and its actual cost.

“The market’s moving from the promise of AI to the price of AI,” he told Reuters.

“There’s no question that AI is going to be transformative for the world in the long run. But that doesn’t mean every AI-related stock is currently priced appropriately. There’s going to be a lot of turmoil.”

His assessment captures a growing concern across financial markets.

Artificial intelligence may ultimately deliver substantial economic benefits, but that does not guarantee that every company investing heavily in the technology will become profitable.

Nor does it mean that current share prices accurately reflect the risks involved.

For companies already struggling with financing costs, slower infrastructure development could make those calculations even more difficult.

The selloff spreads beyond technology companies

The consequences of Thursday’s market decline extended into industries supplying the AI infrastructure boom.

Energy companies have become important beneficiaries of rising electricity demand from data centers, with investors anticipating substantial growth in power consumption.

However, the possibility of delayed construction projects has also raised questions about those expectations.

GE Vernova, which supplies energy equipment and services, fell 7.4%.

Constellation Energy declined 2.5%.

The losses reflected concerns that slower data center expansion could reduce the pace of expected electricity demand growth.

Microsoft also attracted attention following a Bloomberg News report that the company was tightening oversight of certain data center projects involving Nebius, IREN and Nscale.

The report added to investor concerns about whether the technology industry’s largest companies are becoming more cautious about infrastructure commitments.

Meanwhile, the market turmoil could have implications for businesses preparing to go public.

Some analysts questioned whether the deteriorating investment climate might affect the timing of Anthropic’s anticipated initial public offering this autumn.

A postponement, if it occurred, could further weaken confidence in the sector.

No delay was established in the report, but the possibility illustrates how the market’s sudden change in sentiment could influence future fundraising plans.

Asian markets could face another wave of selling

The impact of the American technology selloff may extend beyond Wall Street.

Asian stock markets have benefited considerably from enthusiasm surrounding artificial intelligence, particularly in countries with major semiconductor manufacturers and technology suppliers.

Japan’s Nikkei and South Korea’s Kospi have each gained more than 20% this year.

However, both markets suffered significant declines following Wednesday’s weakness in American data center stocks.

Analysts warned that Thursday’s even larger losses could place additional pressure on Asian trading sessions on Friday.

The semiconductor industry’s global supply chains mean that reduced expectations for American AI investment can quickly affect companies elsewhere.

Investors are therefore watching whether the latest decline represents a temporary reaction to political uncertainty or the beginning of a more sustained reassessment of technology valuations.

The Nasdaq’s correction suggests that confidence had already been weakening before the election results intensified the pressure.

This article is made and published by Nicolai H, who may have used AI in the preparation