AI stocks climb after trillions wiped from market values

Tech shares staged a partial recovery on Friday, clawing back some ground after a brutal sell-off erased trillions of dollars from market values. The Nasdaq Composite closed up 1.1%, reversing part of Thursday’s 5.5% plunge, while the S&P 500 added 0.3%. The Dow Jones Industrial Average ended slightly lower, down 0.4%.

The rout began in the US on Thursday and spilled into Asian and European markets. South Korea’s Kospi fell 6%, with SK Hynix shares plunging more than 10%. In Europe, major indexes in Germany, France, and Spain declined, and London’s FTSE 100 dropped 1.01% as traders digested a Bank of England rate rise and signals of another possible increase to curb prices.

Investors sold tech shares partly on concerns that Democrats’ midterm victory means slower AI development. The party campaigned for new rules and regulations for AI and data centres, and won control of both houses of Congress, including key contests in states central to the AI data centre race. But former President Trump on Friday reiterated his support for “super intelligence,” saying only “foolish leadership” would “say no to the riches they bring.”

Market reaction and expert views

AI-linked businesses, especially chip and semiconductor makers, were hammered on Thursday. Nvidia, SpaceX, and Tesla recovered some ground Friday after losing hundreds of billions in market value. Concerns remain over whether the enormous money spent on AI will pay off.

Russ Shaw, founder of Tech London Advocates, said the incoming Congress is going to focus on AI in a dramatic way. He added, “I’m a big fan of AI, but I’m watching what these companies are doing, and they’re not communicating effectively at all, particularly in the US, about what the benefits of AI are all about.” Pierre Baqué, CEO of AI platform Neural Concept, called the share movements a necessary market correction that reflects legitimate concern about money poured into AI infrastructure. “The industry must move beyond unchecked infrastructure investment and demonstrate greater financial discipline,” he said. Baqué warned that “we are entering a critical transition phase, a market purgatory where raw tech must prove its widespread economic value.”

Dan Coatsworth, head of markets at AJ Bell, described a brutal week for markets. He said the key question is whether the S&P 500 and Nasdaq jump is sustained. “Once investors have had the weekend to catch their breath, next week could give a clearer indication of whether the tech trade is going down the pan or fighting back,” he noted.

Economic backdrop

US employers added 165,000 new jobs in October, more than double analyst expectations and above the average monthly increase. The unemployment rate eased to 4.1% from 4.2% in September, staying in a narrow range since March, according to the Bureau of Labor Statistics. Neil Birrell, chief investment officer at Premier Miton, said the jobs figures may feel like second billing to market movements but are still important. “The US economy is running hard which may mean the risks the markets are worrying about at the moment are not such a risk to the real economy as is being feared,” he said.