Shares in Elon Musk's SpaceX plummeted by more than 9% by lunchtime during Thursday trading. This decline occurred as tech and artificial intelligence stocks broadly fell a day after Democrats won the midterms. The sell-off dragged the tech-heavy Nasdaq Composite index down by more than 5% at one point in early trading, while the S&P 500 dropped by 3.8% by lunchtime.
The market reaction follows Democratic victories in key data center states, including Texas. Investors are reacting to the possible tougher scrutiny of the artificial intelligence (AI) industry and data center construction. Despite Elon Musk spending nearly $450m on Republican campaigns—including at least $45m for Ken Paxton's Texas senate seat—Texas was turned blue in the Democratic tsunami on Tuesday night. Texas governor-elect Gina Hinojosa campaigned against data centers and pledged a moratorium on new construction in that sector.
Chipmakers saw significant losses on Thursday. AMD shares dropped more than 14%, while Micron shares fell by as much as 17% before a slight recovery. Intel shares were down by more than 7%, Nvidia shares fell nearly 9%, and the Philadelphia Semiconductor Index dropped by 10%.
Susannah Streeter, chief investment strategist at Wealth Club, stated that the sell-off on the Nasdaq and S&P 500 was sending shockwaves into other markets. She said, "Fresh panic over the AI trade has hit Wall Street hard." Streeter noted that fears regarding whether the vast sums spent on AI infrastructure will deliver expected returns are colliding with the prospect of a sharp slowdown in data center construction.
Some tech leaders admitted they were caught off guard by the midterm backlash against data centers. At the WSJ Tech conference in Napa, California, on Wednesday evening, OpenAI president and co-founder Greg Brockman said everyone was surprised by the reaction and that more work is needed to ensure community support. Brockman said, "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."
Meta's president Dina Powell McCormick also agreed at the same conference that the industry must improve its communication regarding the benefits of AI. She told the conference, "I think we need to double and triple down on telling the story."
Beyond the immediate election impacts, some investors are now concerned that AI shares might be in a bubble due for a correction.
