Why the US midterms sparked an AI stock selloff

Resumen detallado

Fears of more AI regulation appear to have sparked fear among investors, but concerns about the industry have been growing for some time.

Is the artificial intelligence (AI) gold rush coming to an end, or is this simply a reality check?

That's the question which is hanging over investors, and which has prompted steep falls on the world's stock markets.

The sell-off in the US on Thursday was most dramatic on the Nasdaq, home to tech industry titans such as Alphabet, Nvidia, Meta and Apple.

It followed sweeping gains by the Democrats in this week's midterm elections in the US, which have given the party full control of Congress.

A number of leading Democrats campaigned against the unhindered expansion of data centres, which have underpinned the growth of artificial intelligence.

Fears this will lead to more regulation of AI appear to have concerned investors. But worries about the industry's prospects have been growing for some time.

The release of Chat GPT by Open AI in late 2022 is widely seen as having generated massive public and corporate interest in the practical uses of AI. It also sparked a modern-day gold rush.

Investors flocked to put their money into companies producing computer chips and networking infrastructure, building data centres and providing the energy to power them, as well as developing the AI itself. The value of tech companies soared.

The boom continued into this year. Investments in AI are expected to reach $1trillion in 2026 alone according to research by Goldman Sachs. The sector has scooped up so much available cash that other industries have seen their own borrowing costs increase as a result.

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