AI and market whiplash: Why tech stocks swung after the midterms

AI enters election politics

Artificial intelligence became a prominent U.S. political issue during the midterm elections. Tech executives made record donations to candidates supportive of the industry, while voters in local ballot initiatives considered measures to limit or prevent data center development.

Many newly elected Democrats have promised to regulate AI. The issue has gained political attention partly because AI has also become central to the U.S. economy.

Markets swing after voting

After the midterms, markets initially rallied, then recorded their worst day in nearly two years. Later in the week, the broader market rebounded while Nvidia shares plunged. Joe Rennison, who covers financial markets, said politics contributed to the moves. Investors who had held cash aside amid concern about an unexpected event, such as a contested election, returned to the market after a clear outcome emerged.

Earnings add pressure

The subsequent market drop came after weaker-than-expected financial reports from a couple of AI companies. Investors were also weighing what Democratic control of Congress and Democratic victories at the state level could mean for the AI industry. The swings underscore the influence of AI shares on global markets, particularly the multitrillion-dollar companies based in Silicon Valley.