AI Stocks Rebound After Massive $2.5 Trillion Sell-Off, But Investor Doubts Linger

Technology stocks experienced a recovery on Friday, following a significant downturn on Thursday, as traders evaluated the potential impact of a Democratic victory in the US midterm elections on the artificial intelligence sector. The Nasdaq MarketSite in New York was pictured on November 5, 2026. (Photo: Michael Nagle/Bloomberg/Getty Images)

An AI-driven stock market sell-off, which erased approximately $2.5 trillion in market value from Wall Street, began to ease on Friday after causing considerable disruption in Asian and European markets. US tech stocks saw a modest rebound, with the Nasdaq Composite Index rising by 1.1 percent and the S&P 500 Index climbing 0.3 percent. The Dow Jones Industrial Average, however, declined by about 0.5 percent.

It is common for markets to experience a slight bounce-back after a sell-off as some investors seize the opportunity to purchase stocks at reduced prices. Despite Friday's recovery, the S&P 500 concluded the week with a decline of roughly 2.7 percent, marking its worst weekly performance since April 2025, a period when President Donald Trump's announcement of tariffs significantly impacted global markets.

Some of the US stocks that were most affected on Thursday, particularly those linked to AI, showed signs of recovery. Nvidia's stock increased by 2.8 percent, and SpaceX gained 8.6 percent. Both companies had experienced a sharp drop of approximately 9 percent on Thursday, with Nvidia enduring its most significant single-day loss since January 2025.

The signs of recovery on Wall Street emerged after challenging trading sessions in Asia and Europe on Friday. South Korea's Kospi Index and Japan's Nikkei 225 Index both closed down by 6 percent on Friday, while Taiwan's benchmark Taiex Index finished 4.5 percent lower. These movements reflected a broader investor retreat from some of the most popular investment trends of the year.

Asian technology companies, which are crucial to the global electronics supply chain, had previously benefited from strong demand for components like semiconductor chips essential for building large-scale AI data centers. European indexes, which have a less pronounced concentration of technology stocks, also saw modest declines. The region's benchmark Stoxx 600 Index fell 1 percent, with France's CAC 40 and Germany's DAX dropping 0.8 percent and 1.9 percent, respectively. Shares in ASML, a Dutch manufacturer of chip equipment and Europe's largest company associated with the AI industry, fell 6.6 percent on Thursday but had recovered some of those losses by Friday afternoon, trading up 2.7 percent.

The significant market swings in AI stocks this week highlight the growing investor uncertainty regarding the implications of the US midterm election results for the AI sector. Many investors are concerned that a substantial Democratic victory could hinder the AI investment boom that has significantly boosted both the economy and the markets this year. A study from Columbia Business School estimates that investment in AI-related infrastructure was responsible for nearly all observed US GDP growth by the end of the previous year.

However, opposition to the environmental and community impacts of new data centers has made AI spending a contentious issue in the US midterm elections. Democrats secured control of the House of Representatives and the Senate, and won several other key state races. This decisive victory has fueled concerns that Democratic representatives might now impede or slow down spending on new AI infrastructure. These anxieties became prominent on Thursday, when the Nasdaq experienced a 5.5 percent decline, its worst performance since April 2025, following President Trump's announcement of broad tariffs on most of America's major trading partners.

The recent market volatility follows a year of sharp fluctuations for Asian markets, particularly the Kospi, as investors have debated the long-term viability of the AI boom and the profitability of such substantial investments. Jung In Yun, founder and CEO of Fibonacci Asset Management Global, suggested that Friday's sell-off was likely prompted by investors re-evaluating their expectations for AI investment and policy. Nevertheless, he anticipates that the demand for computing power and memory chips, such as those produced by Samsung Electronics and SK Hynix, South Korea's two largest publicly traded companies, will continue to grow.

"South Korea’s tech-heavy market is particularly exposed to shifts in sentiment, so we may see more swings before confidence settles," Yun commented. Government officials in both South Korea and Japan acknowledged the recent market volatility. Japanese Prime Minister Sanae Takaichi stated, "I am aware share prices, particularly those of AI and chip sectors, are falling sharply. We will focus on steps to create a strong economy." South Korea's Finance and Economy Minister Lee Hyoung-il also convened a meeting on Friday to discuss the economic impact of the US midterm elections. The ministry indicated that potential impacts on global markets "cannot be ruled out" and that measures would be proactively developed to prevent excessive reactions in the Korean stock market.

Global tech stocks have demonstrated sensitivity to sudden shifts in market sentiment throughout the year, with both retail and institutional investors reacting to new data and developments in AI. Theodore Shou, a partner at asset management firm Yiyi Capital in Hong Kong, observed, "If we just focus on AI-related stocks in the market, then I would argue there has been too much of a hype earlier this year. I think the market is just moderating itself." Shou noted that as excitement around AI has increased, Asian tech stocks have become more closely correlated with their US counterparts than ever before. However, he also suggested that some market participants might be anticipating that a Democrat-controlled Congress could slow the pace of interest rate hikes, thereby reducing borrowing costs and potentially benefiting both tech and non-tech equities.

As traders await the official assumption of office by the winners of the US midterm elections early next year, analysts predict that global markets will likely remain sensitive to changes in technology and monetary policy. Andrew Sullivan, who writes about Asian equities in his newsletter Asian Market Sense, stated, "The thing that markets really don’t like is the uncertainty. And what they’re really saying is, we’re not sure what’s going to happen in January. So, let’s just take a step back. Let’s put some money into cash that we can then use once the dust has settled, so to speak."

CNN's John Towfighi in New York and Gage Goulding in Seoul contributed to this report.