Artificial intelligence news: $2.5 trillion tech sell-off raises doubts over AI boom
A $2.5 trillion drop in the tech-heavy Nasdaq has put artificial intelligence stocks under pressure, with investors weighing Democratic election gains, leveraged selling and the planned Anthropic listing.
Artificial intelligence stocks lost heavy ground this week after a $2.5 trillion sell-off wiped value from the tech-heavy Nasdaq on Thursday. Investors pulled back from technology shares amid concern that Democratic midterm victories could slow the buildout of AI data centers. Markets began to steady on Friday, though analysts remain divided on whether the drop was a passing shock or a warning sign.
From election rally to sell-off
The reversal was sharp. Futures initially fell when election results came in late Tuesday, but Wall Street rallied on Wednesday morning as investors welcomed the Democratic gains. By Thursday that optimism had faded, replaced by worries that Democrats could use their new political leverage to tighten regulation of the AI industry.
In Texas, Democratic Governor-elect Gina Hinojosa campaigned on temporarily halting new data center construction and rolling back certain tax incentives for companies building them. Those pledges added to investor unease about the sector's near-term prospects.
Leveraged bets amplified the losses
Analysts said forced selling by investors who had borrowed heavily made the decline worse. Hedge funds and other leveraged investors can face demands from lenders or brokers to post more cash or collateral when their holdings fall. If they cannot, they may have to sell shares, pushing prices lower and triggering further calls for cash.
Jamie Cox, managing partner at Harris Financial Group, said the moves did not signal a crash. He described the situation as companies that had "gotten way over their skis" on borrowing, and expected the hedge fund-driven selling could take a few more days to run its course. He also predicted that companies would keep investing to expand capacity at existing data centers.
Anthropic listing in focus
Attention has also turned to Anthropic, the AI company whose planned initial public offering is widely seen as a key test for the industry. According to The Wall Street Journal, citing unnamed sources, some major investors have grown doubtful that Anthropic can list at a valuation of up to $1.5 trillion. One investor suggested the company might raise less money, while another said the listing, widely expected the week after next, could be delayed until markets calm.
Prediction market Kalshi's odds that Anthropic will go public before December 1 have fallen sharply over the past week. Analysts also see a more difficult outlook for OpenAI, another AI company considering a listing.
Global markets and what comes next
The sell-off spread beyond the United States. Benchmark indexes in Seoul, Tokyo and Taipei, markets that had gained strongly from the AI boom, fell into a bear market or close to one. The S&P 500 suffered its worst one-day loss since April 2025 on Thursday. Government bonds rallied as investors sought safer assets, and the yield on the 10-year Treasury stood at 4.87 percent.
Talk of an AI bubble has circulated for more than a year, and investors have previously brushed off concerns about memory chip shortages, energy bottlenecks and high financing costs. This time, the key questions are whether state-level rules on data centers will tighten and whether the Anthropic listing goes ahead on schedule. What we know so far: the selling has eased, but the outcome of both remains open.
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