The November 3 U.S. midterm elections initially produced a rotation within American equities. By Thursday, November 5, that had become a much broader selloff in technology and AI infrastructure, and the losses spread across Asia on Friday. The market is trying to price a new constraint on an investment boom that has largely been discussed in terms of money and chips: the time, location and political cost of building the facilities that use those chips.
The Nasdaq Composite fell around 5.5% in the Thursday U.S. session, while the S&P 500 lost about 4.4%, according to closing-market reporting. South Korea’s KOSPI closed down 6.02% on Friday according to exchange-session reporting; Taiwan’s chip-heavy market also fell sharply. Both moves followed the U.S. Thursday selloff. Intraday price moves and final closing figures are not interchangeable.
What happened in the AI selloff?
| Indicator | Reported move / context | Why it matters |
|---|---|---|
| Nasdaq Composite, Nov. 5 | About −5.5% | Concentrated exposure to technology and AI spending |
| S&P 500, Nov. 5 | About −4.4% | The damage extended beyond semiconductor stocks |
| South Korea KOSPI, Nov. 6 close | −6.02% | Korean chipmakers and suppliers tied to the infrastructure cycle |
| Taiwan benchmark, Nov. 6 session | Lower during Friday trading; no final closing figure quoted | Semiconductor supply-chain exposure |
| U.S. Treasuries | Yields fell during the equity flight to safety | Investors reassessed growth, Fed tightening and portfolio risk |
These figures describe particular sessions and reporting times, not guaranteed current live quotes. Check exchange closes before updating this table after the next market session.
Why did an election alter expectations for AI capital spending?
The immediate fear is not that Congress has shut down AI development. It is that newly elected state and local officials may demand tougher terms before approving future large-scale data centers. Those terms can involve electricity infrastructure charges, utility rates, water-use disclosures, noise limits, land-use permits and the allocation of costs between an operator and its neighbors.
A project that already has grid access, financing and construction underway faces a different risk from a planned campus that depends on permissions still to be obtained. Investors appeared to be repricing the latter more sharply than the former. For highly leveraged developers, delays affect not only the construction schedule but also the expected date when computing capacity can produce revenue.
Market strategists offered two opposing interpretations. Dan Niles of Niles Investment Management argued that the election creates a fundamental need to reprice the AI investment cycle and could send more investment to Asia. Gregory Allen of Decision Tree Research took a different view: existing projects with permits and construction in progress were less exposed than the political headlines suggested, and developers could address many community concerns by paying more of their infrastructure costs. The second view implies higher costs and slower launches, rather than necessarily lower ultimate demand for computing power.
Why were chipmakers, neoclouds and large cloud companies treated differently?
The sector does not consist of a single business model. Chipmakers and equipment suppliers rely on orders and delivery schedules. Neoclouds and data-center developers may require large capital commitments well before their future cash flows arrive. By contrast, the largest hyperscalers can often redeploy existing capacity, tolerate longer approval processes and refinance more easily.
That helps explain why some shares briefly rallied on the idea that constrained construction might discipline capital spending, even while companies linked directly to new capacity suffered. But it is not a free benefit to incumbent cloud businesses: if the shortage prevents them from supplying customer demand, their future revenue can also be affected. The correct comparison is installed and permitted capacity versus speculative future capacity, not simply big companies versus small ones.
Was this a fundamental decline in demand or forced selling?
Both mechanisms can operate together. Forced selling, crowded positions and margin constraints can amplify a fundamental market repricing. Some strategists see a positioning-led washout rather than an immediate collapse in underlying AI demand. Others, including Dan Niles, argued that policy risk changes the economics of some projects materially.
The test is what follows the initial price move: actual permit suspensions and large-load tariff rulings; whether announced AI capex plans are cancelled, delayed or relocated; future earnings guidance and supplier bookings; debt issuance costs and the revenues that operators can actually earn from commissioned capacity.
Why did Treasury yields fall while the Fed still faces inflation risk?
Two channels are pulling in opposite directions. The risk-off selloff led investors into U.S. government debt and increased speculation that a slowdown in the AI capital-expenditure cycle could reduce demand and inflation pressures. Earlier in the week, declining oil prices had also supported duration by reducing the perceived Iran-related energy risk premium.
But cheaper oil is not a settled geopolitical outcome, and strong economic activity and sticky services inflation could keep the Fed cautious. Bank of America's Mark Cabana argued on a televised market interview that investors were moving too quickly toward a benign end-of-hikes consensus; others saw a potential peak in yields. Both arguments depend on the path of incoming data rather than on the election result alone.
What should investors watch next?
The October U.S. employment report is scheduled for Friday, November 6, at 8:30 a.m. Eastern, followed by the October CPI report on Tuesday, November 10, also at 8:30 a.m. Eastern. Payrolls, unemployment, wages and core inflation will test how much fundamental support exists for revised Fed expectations. Investors should also watch actual state and utility decisions about AI facilities and whether stress appears in credit rather than only equity prices.
Bottom line: The AI buildout has not been formally halted nationwide. Investors are reassessing the timing, profitability and financing of future construction in an already crowded trade. The emerging distinction between existing capacity and unpermitted projects may be more durable than the index-level selloff itself.
Market figures are dated observations, not live prices. The fact of a price decline does not establish the cause of that decline, and political proposals are not necessarily enacted restrictions.
Sources and further information
BLS employment and CPI release calendar · OpenAI infrastructure commitments · Nasdaq historical index information
This article is informational market analysis, not an investment recommendation.