US midterm results fuel tech stock selloff

US technology stocks fell sharply on Thursday after sweeping Democratic gains in the midterm elections gave the party full control of Congress. The Nasdaq suffered the steepest US losses as investors weighed the prospect of tighter rules governing data centres and AI expansion. The political shift intensified existing concerns about inflated valuations and uncertain investment returns.

Leading Democrats campaigned on local opposition to data centres, citing electricity and water consumption, potential increases in household bills, noise and land use. A Gallup poll published in May found 71% of Americans opposed a data centre in their community. Texas governor-elect Gina Hinojosa pledged a moratorium on new facilities, while Democrats are expected to challenge President Trump’s technology agenda through legislation.

Goldman Sachs research projects AI investment will reach $1trillion in 2026 alone, but investors increasingly question whether the spending will generate sufficient profits. Public warnings from AI researchers about safety risks have added to speculation about regulatory intervention.

Nandini Roy Choudhury of Future Market Insights expects investors to favour companies with stronger balance sheets while assessing possible restrictions. Arm Holdings co-founder Tudor Brown sees the selloff as a correction to excessive growth expectations, arguing that continued corporate earnings could limit further declines.