Nasdaq heads for worst day in 18 months amid AI regulation fears

The US Nasdaq index is poised for its poorest performance in a year and a half after slipping as much as five per cent on Thursday, as Wall Street recorded broad losses and investors reacted to signs of stricter regulation for the artificial‑intelligence sector following the recent mid‑term elections.

The benchmark moved into correction territory, sitting more than ten per cent below its latest record high, and marked the biggest single‑day drop since April 2025 when former President Donald Trump announced his ‘liberation day’ tariffs on US trading partners.

Concerns over large AI‑related spending spread across the New York market and rippled to exchanges worldwide as investors priced in tougher oversight of data‑centre expansions.

Chip makers led the decline, with memory producer SanDisk sliding 19 per cent and hard‑drive manufacturer Western Digital falling 16.5 per cent.

The VIX, Wall Street’s volatility gauge, jumped 40 per cent, reaching its highest level since the early weeks of the Iran war, signalling heightened market unease.

Analysts linked the sell‑off to expectations that Democratic governors will tighten rules on new data‑centre projects after the party’s recent success in several gubernatorial contests, and voters also rejected such projects in local referendums across the country.

Neil Wilson, investor strategist at Saxo UK, said a “complete capitulation level event” was playing out in tech stocks on Thursday. “The fear is a total momentum unwind as Democrats pace the frontier and kibosh datacentre buildout … this looks totally overdone but the nature of ‘sell everything’ in this market means we need to look for some stability first,” Wilson said.

The Dow Jones industrial average fell by more than 1,000 points in late‑morning trading, a decline of about two per cent to 52,264 points.

Nvidia, the chipmaker central to the AI surge, was the biggest loser on the Dow, down 6.7 per cent, while Goldman Sachs dropped 5.7 per cent.

The downturn reverses a rally on Wednesday that had delivered the market’s strongest daily gain in months, driven by expectations that Democratic victories would curb the White House’s agenda.

Tech analyst Dan Ives warned that the mid‑term outcomes clearly indicate a slowdown in data‑centre construction, stating, “There is no way to sugarcoat that Democrats taking control, especially over the Senate, will create some major hurdles for AI and tech legislation in the Beltway over the next two years.”

An early rally in European markets faded by the close, with Britain’s FTSE 100 ending down 46 points, or 0.4 per cent, at 10,782.66.