Democrats' Midterm Win Triggers $3.2 Trillion AI Selloff

By Olivia Hart

More than $3.2 trillion was wiped off the US stock market in a single session, as investors fled technology stocks on fears that the Democratic Party's midterm victory will cool the AI investment boom.

The selling did not stop at the American close. Japan's Nikkei slumped almost 6% today, its worst drop since April 7, 2025, the day of the 'liberation day' tariff panic. South Korea's KOSPI fell 6.7% and Taiwan's TAIEX lost 4.5%.

What happened on Wall Street?

The Nasdaq tech index fell 5.5%. The Dow Jones Industrial Average dropped 1,833.06 points, or 3.44%, and the S&P 500 lost 4.36%. According to FT calculations based on FactSet data, the loss of market value on the S&P Composite 1500, a broad basket of US-listed companies, was the largest since the turn of the millennium.

Memory chip makers that had profited most from the AI boom led the fallers. SanDisk fell 22%, while Micron and AMD each lost 17%. Nvidia, down more than 9%, was the worst performer on the Dow.

The rout had been building. After months of warnings that AI valuations were too high and that the bubble might burst, US investors dashed for the exits en masse yesterday. Kyle Rodda, senior financial market analyst at Capital.com, called it a "brutal sell-off" as fears about the future of the AI buildout gripped the markets.

The chip losses cut deepest: a fifth of SanDisk's value vanished in one day.

Why are Democrats blamed for the selloff?

The selling resumed as investors weighed what a Democrat-controlled Congress means for tech regulation and the AI boom. Analysts pointed to policy uncertainty: Democrats are more critical of data centres, which could slow the rollout of AI investment, especially given public opposition to the sector.

President Donald Trump blamed the opposition party directly. Posting on his Truth Social site, he wrote:

The Stock Market suffered one of the Worst Days in History based on the results of the Election. Such a sad thing to watch! It took so much work to get us to a level that no one has ever seen before, and then this. Your 401(k)s have, therefore, dropped. Remember, it wasn't Republicans, it was Dumocrats.

He then appeared to extend the blame to voters themselves, writing: "The Stock Market crashed today because the Dumocrats had a big Tuesday — So sad to see, you only have yourselves to blame!"

Politics is only part of the story. The regulatory risk lands on a trade that was already shaky: earnings season has disappointed, with Magnificent Seven results undershooting growth expectations and flashing warning signs that the pace of AI spending is slowing.

The caveat is obvious. Democrats have passed no AI legislation yet; the market is pricing a possibility, not a policy.

How bad is it for Asian investors?

Christopher Forbes, head of Asia and Middle East at CMC Markets, called the action "a bit of a disaster" and described the fallout to Reuters:

(Clients) were long index, long stocks, and they all got carried out. All night, all day – we had client margin calls, client complaints ... because it's a very emotional thing, right?

He warned the damage extends beyond valuations. "It's basically a whole policy and six-year structural shift that says we're now going to pause, we're now going to cool AI, we're now going to cool data centres, approvals and equity capital markets," Forbes said.

Margin calls across a full trading day and night signal leveraged positions, not just nervous long-term holders.

What else moved today?

UK house prices fell 0.6% in October, Lloyds reported, leaving prices 1.2% lower than a year ago — the biggest annual drop since October 2023. A Reuters poll of economists had expected a 0.1% monthly rise and a 0.3% annual decline. The average property price slipped to £296,285, from £298,167 in September.

Andrew Asaam, mortgages director at Lloyds, said housing demand "is currently being tested by a challenging economic backdrop," citing renewed inflationary pressures driven partly by the Middle East conflict that keep borrowing costs high.

Investors now turn to the US non-farm payrolls report due at 1.30pm GMT, alongside the UN's FAO food price index at 9am and the University of Michigan's consumer confidence reading at 3pm. The jobs data will test whether the AI-led equity damage is spreading to the real economy — and whether yesterday's trillions in losses were a repricing or the start of something worse.