A sharp sell-off in technology and AI shares wiped an estimated $2.5trn from US market value yesterday with the largest “Magnificent Seven” tech stocks alone losing about $1tn. The panic has spread across Asia overnight and looks set to hit Europe when trading opens this morning.
We will be discussing this on our 11am show this morning. Andrew McHattie of the Investment Trust Newsletter will look at October’s big trust fallers and risers to assess where investors are moving their money. Register here.
US falls
On Thursday the Nasdaq Composite plunged 5.5% to 24,315. It was the tech index’s worst day since April 2025 and left it 11.9% below its 6 October record, which puts it in correction territory. The Nasdaq 100 dropped 6.4%, its steepest fall since March 2020.
Bearing the brunt of the backlash, the Philadelphia Semiconductor Index slumped 12%. Amid a surge in volatility the VIX “fear” index jumped to 28.2. The benchmark S&P 500 index lost 4.4% to 7,353.7 and the Dow Jones fell 3.4% to 51,523, wiping out Wednesday’s post-election gains.
Asian falls
In Japan the Nikkei 225 slid 6% to take it more than 20% below its June record and into a bear market. High tech investor SoftBank fell 11%.
South Korea: The Kospi fell as much as 8.6%, dropping below 5,000 and triggering a 20-minute circuit-breaker halt. Samsung Electronics and SK Hynix, which make up more than half the index, slumped 10% and 12%.
Taiwan: Its benchmark index dropped more than 8%, with TSMC , the world’s largest chip foundry, down 8.5%.
Europe this morning
European stock futures point to a fall of about 1% at the open. Chip and AI-power stocks are the most exposed. The UK’s FTSE 100 holds few technology stocks, so may hold up better. European semiconductor stocks already fell about 11% on Thursday, with ASML down 6.5%.
Technology investment trusts have inevitably been caught up in the rout, shedding some of their impressive returns of the past three years.
Manchester & London (MNL) unwound 11.6% of its gains yesterday. At 760p it has given up 27.6% in the past month.
Allianz Technology Trust (ATT) retreated 4.7% to 617.2p, taking its on-month decline to 21.4%.
Polar Capital Technology (PCT) curbed its loss to 2% yesterday but is still left with a bruising 21.2% fall over four weeks.
Political factors
Democrats won both the House and the Senate in Tuesday’s midterms. Investors now fear tighter AI regulation, antitrust scrutiny of Alphabet, Amazon, Microsoft and Meta, and limits on data-centre energy use after rising electricity prices had made data centres a campaign issue.
Texas holds more than a quarter of planned US data-centre capacity. There, Democrat Gina Hinojosa defeated Greg Abbott after promising a moratorium on new data centres and an end to their tax breaks. Voters also opposed data centres in 40 of 41 local ballot measures.
Market and stock factors
Investors now expect the AI infrastructure build-out to be slower and more expensive. Semiconductor and telecom equipment manufacturer Qualcomm fell 9.5% after giving a weak outlook in its fourth quarter results that otherwise beat expectations.
Chipmakers: AMD fell 17.3%, Nvidia 9.3%, Broadcom more than 10%, Micron more than 17% and SanDisk more than 22%.
AI cloud providers: CoreWeave, Nebius and IREN fell 10% to 17%. CoreWeave’s credit default swap spreads hit a record, a sign of strain in how these firms raise money.
Power suppliers: GE Vernova lost 7.5%.
Tesla: fell 10.8% after investors anticipated stricter oversight regarding Elon Musk firm’s robotaxi program, autonomous vehicle initiatives, and employment practices.
Forced selling by distressed hedge funds unwinding their leveraged positions was also reported to have made the falls bigger.
How “Red October” set this up
The Nasdaq has been sliding since its 6 October peak. It fell about 5.3% in October, its worst month since March 2025, and the Nasdaq 100 lost about $2tn of value. Big tech company results raised doubts about whether AI spending will pay off:
- Alphabet had its biggest one-day fall on record after search revenue growth slowed and cash burn rose.
- Amazon kept its 2026 spending plan at about $220bn, with negative free cash flow over the past 12 months.
- Meta’s record $97.5bn fundraise raised fears of shareholder dilution.
- Microsoft’s $25bn bond sale highlighted growing reliance on debt.
Falls in US government bonds pushed ten-year yields near 4.9% to increase borrowing costs, adding to the pressure from high oil prices.
Today’s US payrolls report will be seen as the next test of investor confidence.
