Wall Street Stocks Slide on AI Data Centre Fears
Tech stocks tumbled on Wall Street on Thursday on concerns over the future of AI data centre projects following the US midterm elections, wiping out gains from a post-election rally the day before.
The tech-heavy Nasdaq Composite fell more than five per cent in late morning trading in New York before paring losses, with chipmakers bearing the brunt of the sell-off.
Industry giant Nvidia fell more than six per cent, while its competitor AMD dropped 12 per cent and memory chip maker Micron lost 11 per cent. The three companies supply the processors and memory that power AI data centres, and the huge buildout of those facilities by tech giants has been a key driver of their revenue growth in recent years.
Wall Street stocks slide as data centre doubts grow
Data centres have faced broad opposition from US voters regardless of political affiliation, and many midterm winners have pledged to put the brakes on such projects, for example by imposing moratoriums on new buildouts.
“Tech stocks have gone into freefall, as investors focus on what the new guys in Congress will do to a sector so favoured by the current president and his coterie,” said Chris Beauchamp, chief market analyst at online trading and investing platform IG.
He noted that AI stocks had driven the rally this year and that markets hate uncertainty.
“If this goes south, this market action turns from rotation to general panic,” Beauchamp said.
The Philadelphia Semiconductor Index, which includes the global heavyweights in the AI-related industry, fell more than eight per cent.
Oil rebounds as war fears ease
Oil prices recovered after plunging as much as 10 per cent on Wednesday on hopes of progress towards ending the US-Iran war in case of increased Democratic pressure for a diplomatic solution.
“A release valve has been unscrewed following the Democratic success of the midterms, with pent-up concerns about an escalation of the war in the Middle East evaporating,” said Susannah Streeter, chief investment strategist at Wealth Club.
European stocks initially rose on relief following the US midterm election results, with Frankfurt’s DAX index hitting a record high and London coming close to a new all-time peak. But Frankfurt and London ended the day in the red.
Tech-heavy Asian stock markets slid overall, with Seoul shedding more than five per cent.
In Britain, the pound was little changed after the Bank of England raised its benchmark interest rate to 4 per cent, as expected, for the first time in more than three years as inflation stays high.
Winners and losers beyond tech
Away from AI and Trump, shares in Air France-KLM climbed nearly 13 per cent after the carrier surprised investors with higher operating profit in the third quarter despite a soaring jet fuel bill.
Rheinmetall plunged more than 15 per cent as the German defence giant cut its earnings outlook for a second time in several months after Berlin pulled the plug on a major warship contract.
What it means for Pakistan
Pakistan’s own market moved the other way on Thursday. The KSE-100 gained 3,450 points as the Pakistan Stock Exchange extended its rally for a second session, showing that local investors were not swept up in the global tech sell-off.
The Bank of England decision still matters for Pakistan. The pound is a key currency for exporters and for families who receive money from relatives in Britain, and the rupee has been gaining against the dollar in recent sessions.
Oil is the other link. Prices have fallen for a fourth straight day on easing Iran war risk, and Thursday’s rebound was modest. Cheaper oil eases Pakistan’s import bill, while a fresh spike would push it up again. That is why the progress in US-Iran talks matters as much to Islamabad as the Nasdaq slide matters to New York.
Dawn reported the market moves on Thursday night.
Frequently asked questions
Why did tech stocks fall on Wall Street?
Investors worry that new members of Congress will slow AI data centre projects after midterm winners pledged moratoriums on new buildouts. Chipmakers that supply the centres fell hardest.
How far did the Nasdaq fall?
The Nasdaq Composite fell more than five per cent in late morning trading in New York before paring losses.
Which chip stocks dropped most?
AMD dropped 12 per cent, Micron lost 11 per cent, and Nvidia fell more than six per cent. The Philadelphia Semiconductor Index fell more than eight per cent.
What does the Wall Street slide mean for Pakistan?
Pakistan’s KSE-100 rose on the same day, so local shares were not hit. The bigger links for Pakistan are oil prices, which affect the import bill, and the pound, which moved after the Bank of England raised rates to 4 per cent.
