Nasdaq 100 eyes $1.8 trillion loss as Democratic win sparks AI delay fears

By Niket Nishant

Nov 5 (Reuters) - The Nasdaq 100 index was set to lose a whopping $1.8 trillion in stock value on Thursday as investors feared that the sweeping midterm victory of Democrats could stall the pace of AI infrastructure expansion.

The rout marked a dramatic slide from a relatively mild initial reaction in the previous session, when the index, stacked with elite tech companies, rose on hopes that an end to election-related uncertainty could improve overall sentiment.

"Wall Street badly needs a happy AI story right now," said Matthew Tuttle, founder and CEO of Tuttle Capital Management. "We now probably have two years of nothing. Divided government, angry politics, and very little getting passed."

Shares of semiconductor and neocloud companies, which were behind much of the market's gains in the recent past, witnessed sharp declines for a second straight day on worries that data center buildouts worth billions of dollars could face delays.

The Philadelphia SE Semiconductor index fell 8.4% to its lowest level in more than six months, led by losses in heavyweights Nvidia and Broadcom.

Hyperscalers, which defied the selloff on Wednesday on hopes that slower data-center construction could rein in Big Tech's AI spending, also dropped. Amazon.com fell 2.5% and Alphabet 1.4%.

The losses suggested investors are beginning to price in the possibility that political gridlock and greater scrutiny of data-center development could slow one of Wall Street's most important growth engines.

Around 30% of expected US data center capacity additions in 2028 could be at risk from potential construction pauses, UBS analysts estimated, highlighting the threat to an industry whose growth depends on a rapid build out of new facilities.

The political jitters are hitting an AI trade that was already on shaky footing in recent weeks, on worries surrounding the enormous sums being poured into the technology.

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CoreWeave, which has become a barometer of investor anxiety over heavy AI spending, slumped 12%. Five-year credit default spreads widened to a record high, according to data from S&P Global Market Intelligence.

Nebius, another neocloud company, also dropped 15.2%.

The sharp declines put the Nasdaq Composite on course to confirm a correction, or a 10% drop from its recent peak. The Nasdaq 100 was last down 4.5%.

"The market's moving from the promise of AI to the price of AI," said Ted Parkhill, founder and CEO of Incline Investment Management.

"There's no question that AI is going to be transformative for the world in the long run. But that doesn't mean every AI-related stock is currently priced appropriately. There's going to be a lot of turmoil."

Data-center operators Applied Digital, Cipher Digital and IREN tumbled more than 14% each.

The weakness extended to utilities and equipment suppliers exposed to the buildout. GE Vernova fell about 6%, while Constellation Energy slipped 3%.

Microsoft declined 2%. The company is tightening oversight of some data center projects from Nebius, IREN and Nscale, Bloomberg News reported.

Separately, Qualcomm plunged 12% after quarterly smartphone-chip sales missed Wall Street estimates.

(Reporting by Niket Nishant and Shashwat Chauhan in Bengaluru; Editing by Anil D'Silva and Arun Koyyur)