The technology-heavy US Nasdaq lost more than US$2 trillion in value as tech stocks plummeted over the last two days, with many fearing Democratic lawmakers – which now control both the Senate and the House after routing Republican hopefuls in the midterm elections.
"There is some concern regarding AI regulation, and fears that there could be far more regulations coming to AI technology, as well as a pushback on the buildout of data centres across the country," David Busch, chief investment officer of Trajan Wealth, told NPR following the crash.
Many Democrats campaigned on an anti-Big Tech ticket, and concerns over growing data centre developments influenced many voters.
All said, the Nasdaq dropped by five per cent, with similar but less drastic results seen on the Dow Jones and S&P.
Elon Musk was one of the biggest losers. Not only did his nearly half a billion in campaign funding not equate to Republican victories, but Tesla stock has also slumped by almost 11 per cent and SpaceX by nine per cent. According to Forbes, Musk’s personal net worth took a $US80 billion hit.
Asian markets followed, with South Korea’s Kospi falling more than eight per cent while Japan’s Nikkei fell by six per cent.
Australian markets have also felt the impact, though not nearly so sharply. The ASX opened more than one per cent down this morning, and tech stocks were down by 1.3 per cent as the Wall Street selloff continues.
However, Dr Yongxin Xu, of Monash University’s Faculty of Business and Economics, says the impact on Australian stocks is not his main concern.
"The bigger story for Australia is not the ASX, which is resource-heavy and will feel only a muted hit,” Dr Yongxin Xu said.
“It is that Australia has no frontier Large Language Model of its own. Our firms and households rely on US-developed AI models, so changes to regulation could restrict what we can access.”
That said, those who fear the AI bubble may be about to burst should not be worried – or cheered, depending on one’s stance regarding AI.
“AI is unstoppable. It is now a race between nations and central to national security. With Democrats controlling Congress, regulation will escalate,” Dr Xu said.
“Regulation is necessary: my research shows AI agents are not capable of providing quality financial recommendations, yet AI providers already offer them to consumers. This week's sell-off re-prices that regulatory risk; but it doesn't end the AI boom."
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