Nasdaq Rebounds 1.1% After Midterm Rout Tied to Data-Centre Fears

Wall Street closed a volatile week with a partial recovery after Democratic midterm victories triggered a sell-off in companies tied to artificial intelligence infrastructure, on fears that new political obstacles could slow data-centre construction. The Nasdaq Composite rose 1.09 per cent to 24,579.42 on Friday, and the S&P 500 gained 0.31 per cent to 7,376.87, while the Dow Jones Industrial Average fell 0.46 per cent to 51,285.73. The rebound recouped only a fraction of Thursday's losses, when the Nasdaq fell 5.52 per cent and the S&P 500 4.36 per cent, their worst sessions since April 2025; the Nasdaq ended the week 3.37 per cent lower and remained in correction territory, more than 10 per cent below its October peak.

The mechanism investors identified was political rather than industrial. Data centres featured in 41 ballot measures across 10 states, and voters backed some form of restriction or ban in all but one, according to Newsweek. Texas, which Wells Fargo estimates holds 27 per cent of planned US data-centre gigawatts, elected Democrat Gina Hinojosa as governor on a promise of an immediate moratorium on new approvals; she later said the measure would affect only new licences and be temporary, UOL reported, which helped calm markets. Chipmakers led both legs of the move: Nvidia fell 9.3 per cent on Thursday and rose 2.8 per cent on Friday, AMD fell 17.3 per cent and gained 11 per cent, and the Philadelphia Semiconductor Index lost 12.3 per cent before recovering more than 3 per cent.

Views diverged on whether the sell-off was proportionate. Ajay Rajadhyaksha of Barclays said the election result did not justify the magnitude and attributed the fall partly to forced selling by hedge funds; Keith Lerner of Truist Advisory Services called it a knee-jerk reaction and said AI remained the dominant theme of the bull market. President Donald Trump blamed Democrats for the drop and, in a Truth Social post, declared himself "100% in favor of Super Intelligence", saying states that host the industry would become rich. Markets in Asia and Europe fell on Friday, with Tokyo's Nikkei 225 down about 6 per cent and the Stoxx Europe 600 off 1.1 per cent.

Attention now turns to the Federal Reserve's December meeting, where traders priced a 77 to 78 per cent chance of a rate rise after October payrolls rose by 165,000 and unemployment fell to 4.1 per cent. Also pending is the market debut of Anthropic, which has filed for an initial public offering and has yet to turn a profit, a test of whether AI revenue can sustain the investment the sector has promised.