The cocaine nose jobs of Wall Street dumped chip and memory shares over fears that newly elected Democrats might spoil the AI spending party.
According to Reuters, CNN and MarketWatch. Sandisk plunged 22.3 per cent, while Micron lost 17.5 per cent and AMD fell 17.3 per cent. Western Digital dropped 17.4 per cent and Seagate shed 16.3 per cent, giving the storage industry a particularly unpleasant afternoon.
Nvidia fell 9.3 per cent, wiping out its year-to-date gains. Intel dropped 10.3 per cent as the Philadelphia Semiconductor Index sank 12.3 per cent.
According to Reuters, investors were reassessing what the Democrats’ midterm victories could mean for data centre construction. After months of assuming enormous AI budgets would keep chip orders flowing, they suddenly remembered someone has to approve the buildings.
Texas gave them a specific reason to worry. Governor-elect Gina Hinojosa campaigned for a temporary data centre moratorium and the removal of developer tax incentives. Google, Meta, Oracle and OpenAI have committed substantial investments to the state.
The prospect of slower approvals was enough to send investors running before the incoming administration had taken office. Any restrictions that delay new capacity could push back orders for processors and memory, leaving suppliers waiting for sales already baked into their valuations.
The Nasdaq Composite fell 5.52 per cent, ending almost 12 per cent below its October record. The S&P 500 lost 4.36 per cent, while the Dow dropped 1,833 points.
There was an entertaining change of mind along the way. On Wednesday, investors welcomed the possibility that restrictions would curb spending by the biggest cloud companies and leave more cash for shareholders. By Thursday, the same prospect looked sufficiently terrifying to justify dumping technology shares.
The election did not create every problem facing the sector. Financing concerns had already been troubling the AI infrastructure trade, and the Nasdaq had been retreating from its October peak. The Democratic victories gave nervous investors another reason to sell.
Truist Advisory Services chief investment officer Keith Lerner described the retreat to Reuters as “something of a buyers’ strike in tech”.
“The rubber band could get stretched further to the downside,” Lerner said.
