Wall Street’s technology-led selloff on Thursday rattled investors, wiping out nearly $3 trillion in market value from S&P 500 companies as concerns over artificial intelligence spending and tighter regulation triggered a broad retreat.
The Nasdaq Composite plunged 5.52% to close at 24,315, marking its biggest one-day decline in 19 months and pushing the index into correction territory.
The S&P 500 fell 4.36% to 7,353.73, while the Dow Jones Industrial Average dropped 3.44% to 51,523.06. Chip stocks led the tech rout with the Philadelphia Semiconductor Index plunging more than 12%.
Worries spread across globe
The selloff quickly spread beyond Wall Street. Japan’s Nikkei 225 fell 6% on Friday, while South Korea’s Kospi also lost 6%, with semiconductor stocks among the biggest decliners.
European markets opened lower, with Germany’s DAX down 2% and Britain’s FTSE 100 falling 1.9%.
The reversal followed Democratic victories in the US midterm elections, which handed the party control of both chambers of Congress.
Investors are concerned that greater regulatory scrutiny, restrictions on power consumption and opposition to new data centers could slow the infrastructure expansion underpinning the AI boom.
Against this backdrop, comparisons with the dot-com bubble of 2000 have resurfaced, as investors question whether technology valuations have moved too far ahead of the underlying businesses.
Jim Cramer on AI selloff
CNBC’s Jim Cramer believes the correction may not be over, particularly for semiconductor stocks that surged during the AI rally.
“I wish I could say that today’s flush was the bottom,” the Mad Money host said.
“But I look at the charts, and there still seems like there’s no support for so many tech stocks, especially the semis, because they ran so much on the way up.”
However, Cramer said the current decline was different from the 2000 crash because today’s leading technology companies are largely profitable businesses whose stocks had become excessively expensive.
“Unlike 2000, these are mostly lucrative companies with stocks that went too high,” he said.
He identified debt exposure among neocloud companies such as CoreWeave and IREN as a bigger potential threat, particularly if financing problems spread.
The dot-com bubble developed during the late 1990s as investors poured money into internet-related businesses, often valuing companies on expectations of future growth rather than proven earnings.
The Nasdaq peaked in March 2000 before losing nearly 78% of its value by October 2002, wiping out trillions of dollars in market capitalization.
Critics believe the current AI boom could also end in a similar manner. Tensions have further exacerbated after Thursday’s selloff.
However, Nasdaq-100 futures were rising on Friday, showing signs of recovery even as Dow futures were in the red.
Cramer, meanwhile, said he welcomed a sharper correction rather than a prolonged, gradual decline.
“If you have cash you won’t panic. You won’t be complacent, either. You will be clear-headed and that’s how you will lose less money until things get better. They always do,” he said.
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