Shares of Elon Musk-led SpaceX and Tesla plunged on Thursday as technology and artificial intelligence stocks witnessed a major sell-off following the US midterm elections, with investors concerned that the Democrats’ electoral gains could lead to tighter scrutiny of the AI industry and data centre expansion.
SpaceX shares fell around 8%, while Tesla lost nearly 11%, as the market reacted to the possibility of regulatory hurdles for companies investing heavily in AI infrastructure. The Democrats’ victories, including in key states such as Texas, have raised expectations of greater political resistance to new data centre projects.
The technology-heavy Nasdaq Composite dropped 5.5%, wiping out an estimated $2.5 trillion in market value and entering correction territory. The S&P 500 also declined 4.4%, while the Dow Jones Industrial Average fell more than 3.4%, marking one of the worst trading sessions for US markets since April 2025.
Semiconductor companies were among the hardest hit. Nvidia shares fell more than 9%, while Advanced Micro Devices and Micron suffered losses exceeding 17%. Intel also recorded a sharp decline, while the Philadelphia Semiconductor Index, which tracks major chipmakers, dropped more than 12%.
Investors are increasingly concerned that Democratic control of Congress could bring tougher regulations, delays in construction approvals and restrictions on the rapid expansion of data centres. These facilities are central to the development of AI services but have faced growing opposition over their electricity and water consumption, as well as their impact on local communities.
Texas has emerged as a key area of concern for the industry. Governor-elect Gina Hinojosa campaigned against the unchecked expansion of data centres and pledged to pause new construction approvals until stronger safeguards are introduced.
Musk had reportedly spent nearly $450 million supporting Republican candidates during the election cycle, including campaigns in Texas. The Democratic victories have therefore added another layer of uncertainty for his businesses, which have significant investments in the state.
The market downturn also reflects broader investor concerns about whether the enormous sums being invested in artificial intelligence will generate sufficient returns. Analysts have warned that a slowdown in data centre construction could affect chipmakers, technology companies, infrastructure providers and other businesses linked to the AI ecosystem.
The sell-off followed a strong rally on Wednesday, when markets initially responded positively to the election results. However, renewed concerns over AI spending, infrastructure expansion and possible regulatory changes quickly reversed the gains.
The sharp decline highlights how the changing political landscape in Washington could influence the future direction of the technology sector, particularly companies whose growth plans depend on the rapid expansion of AI infrastructure.
