Nasdaq enters correction territory
The Nasdaq, which is full of AI-related and other tech stocks, sank 11% below its all-time high set last month. A loss of more than 10% off recent highs qualifies as a "correction".
Stock markets around the world felt pressure from continued drops for companies that had benefited from the boom in the artificial-intelligence technology industry, and South Korea's Kospi index tumbled 5.3%.
Such stocks have been swinging for months on worries that the construction of further AI data centres may slow because of how expensive it's become to borrow money. Critics also said AI stock prices had shot too high and were in a bubble.
Tuesday's US midterm elections added another challenge. The nationwide victories by Democrats raised the possibility that governments could force pauses in construction of more data centres. Voters across political parties say they're wary about AI and don't like the increases to power bills caused by data centres.
Any slowdown in AI data centre construction would mean fewer purchases of AI chips, not to mention electricity and other products and services that are getting vacuumed up in the AI frenzy, which is driving much of the US economy's growth.
Nvidia and AMD lead the falls
Nvidia, the chip company that quickly became the face of the AI boom, fell 8% and was by far the heaviest weight on the S&P 500, a day after dropping 3.2%.
Advanced Micro Devices tumbled 14%. CoreWeave, a company that rents access to AI chips to customers over the cloud, fell 8.9%. GE Vernova, which has been helping to power data centres, sank 6.9%.
AI chip stocks are some of Wall Street's most influential because they've become some of the largest. A 1% move for Nvidia, for example, has more effect on the S&P 500 than a 1% move for nearly any other US stock.
The losses were broad after morning gains for the majority of stocks on Wall Street quickly evaporated.
Oil rebounds as Treasury yields fall
In other financial markets, the initial knee-jerk reaction to the US midterm election results faded a bit.
The price of a barrel of Brent crude oil rose 3.9% to $US98.29 and recovered a chunk of its nearly 9% drop from the day before. Uncertainty still reigns about what will happen in the war with Iran and when the global energy industry can return to normal.
In the bond market, Treasury yields continued to tumble. The yield on the 10-year Treasury fell to 4.83% from 4.90% late on Wednesday. It had been at 4.95% on election night and above 5.30% last month.
That could be a signal that investors are herding into US Treasury bonds in search of something that's safer to own than stocks.
The drop came despite some encouraging reports on the US economy. Fewer US workers applied for unemployment benefits last week.
A separate report, meanwhile, suggested overall productivity for US workers improved by more during the northern summer than economists expected. That could help the economy grow without adding pressure to the nation's high inflation.
Global markets feel AI pressure
On global markets, indexes were mixed across Europe and Asia.
South Korea's Kospi tumbled 5.3%, while Japan's Nikkei 225 also felt the sting of drops for tech and AI-related stocks and sank 1.8%.
London's FTSE 100 dipped 0.4% after the Bank of England increased its main interest rate for the first time in three years to help limit high inflation.
The bank said its next moves on interest rates largely hinge on what happens with the Iran war, which sent oil prices and inflation higher worldwide.
"We've seen encouraging news in the past 48 hours," Bank of England Governor Andrew Bailey said at a press briefing. "The best thing that can happen is to resolve the conflict in the Middle East; there's no question about it."
