US midterm election results hit AI stocks as regulation fears grow

US stock markets fell sharply Thursday, led by the Nasdaq, after Democrats gained full control of Congress in the midterm elections, raising investor fears of increased AI regulation. The sell-off hit major tech firms like Alphabet, Nvidia, Meta, and Apple. Democratic campaigns targeted the unregulated expansion of data centres, citing high water and electricity use, noise, and local disruption. A May Gallup poll showed 71% of Americans oppose data centre construction in their communities, and Democrats are now expected to introduce legislation curbing industry growth. Concerns about AI overvaluation predate the election, with investments projected to reach $1 trillion in 2026. Analysts suggest the drop may be a market correction, with investors becoming more selective, though some experts see a natural floor given continued profitability in the sector.