U.S. stocks stabilize as AI spending fears hit Asian markets

U.S. stocks recovered modestly Friday after a sharp technology-led sell-off. The Nasdaq 100 closed up 1.1% after plunging 6.3% Thursday, its worst single-day performance since the Covid-19 pandemic. The S&P 500 gained 0.3% after a 4.4% decline that erased $2.8 trillion in paper wealth. A strong October jobs report increased expectations of a Federal Reserve interest rate increase in December, limiting the rebound.

Investors are reassessing AI infrastructure spending after Democratic midterm victories elevated candidates promising tighter controls on AI and data centers. Texas Gov.-elect Gina Hinojosa has called for a pause in new data center developments. The incoming Democratic-controlled Congress could increase scrutiny, potentially delaying projects and raising costs while investors remain concerned about long-term returns.

Asian markets suffered steep losses because of their exposure to the hardware supporting U.S. AI investment. South Korea’s Kospi fell more than 8%, triggering a temporary trading halt, while Taiwan’s TAIEX dropped 9%. Samsung and SK Hynix plunged more than 10% in early trading before recovering some losses.

Some analysts viewed the sell-off as a correction in an overstretched market rather than an end to the investment boom. Continued demand for computing power could support semiconductor and memory suppliers, although uncertainty over construction restrictions and valuations is likely to sustain volatility.