Technology and artificial intelligence stocks have suffered sharp losses, dragging down the Nasdaq Composite index which fell by over 5% in early trading – following a sweeping Democratic victory in the US midterms.

The market sell-off was heavily driven by investor anxiety over and data centre construction.

Companies heavily tied to AI and hardware development faced immediate downward pressure. Chipmakers experienced significant drops, with AMD falling nearly 17%, Micron plunging over 20%, Intel sliding 18% and Nvidia dropping more than 10% over five days. The Philadelphia Semiconductor Index similarly tumbled over 13%.

Elon Musk’s companies were hit particularly hard. SpaceX shares plunged more than 7%, and Tesla dropped over 9%. Musk had spent nearly $450 million supporting Republican campaigns, including at least $45 million backing candidates in Texas.

Tech leaders admitted that the industry had been caught off guard by the intensity of the political and community backlash against data centre expansion. Speaking at the WSJ Tech conference in Napa, California, OpenAI president and co-founder Greg Brockman noted that tech firms can no longer simply try to build massive infrastructure hubs without deeply engaging local populations.

“You can’t just tweet and say: ‘This is going to be good.’ You need to be in those communities,” Brockman said.

Meta president Dina Powell McCormick echoed these sentiments, emphasising that the tech sector needs to redouble its efforts to communicate the tangible benefits of AI to the public. Beyond immediate political fallout, some investors are also growing increasingly concerned that valuations across the AI sector may be entering an overheated bubble ripe for correction.

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