SpaceX and Tech Stocks Plunge Amid AI Fears and Political Shifts

Shares in Elon Musk’s SpaceX plunged as part of a broader sell-off in technology and artificial intelligence (AI) stocks, triggered by the outcomes of the recent midterm elections.

The tech-heavy Nasdaq Composite index fell by more than 5% in early trading, dragged down by concerns over potential stricter regulations targeting data center construction and the AI sector. Democrats secured key victories in states crucial to data center development, including Texas, prompting fears of a regulatory slowdown.

Following the election results, some industry leaders have acknowledged the need to better communicate the benefits of AI and data infrastructure to local communities. SpaceX shares dropped more than 9% by midday Thursday, while Tesla shares, another Musk-led company, fell by over 11%.

Musk had invested nearly $450 million in support of Republican campaigns, including at least $45 million for Ken Paxton’s Texas Senate bid. However, Texas voted Democratic, and the state’s governor-elect, Gina Hinojosa, campaigned heavily on imposing a moratorium on new data center construction.

The sell-off heavily impacted semiconductor manufacturers, with AMD shares falling more than 14%, Micron dropping as much as 17%, Intel declining over 7%, and Nvidia falling nearly 9%. The Philadelphia Semiconductor Index plunged by 10%, dragging the broader S&P 500 index down by 3.8% by midday.

Susannah Streeter, chief investment strategist at Wealth Club, noted that the steep declines on the Nasdaq and S&P 500 were sending shockwaves through global markets. “Fresh panic over the AI trade has hit Wall Street hard,” she stated, adding that fears of an AI infrastructure bubble colliding with a potential slowdown in data center construction are driving the market anxiety.

OpenAI co-president Greg Brockman admitted that the industry was caught off guard by the local backlash against data centers. He emphasized that companies cannot simply announce infrastructure projects on social media; they must actively engage with local communities. “You can’t just tweet and say: ‘This is going to be good.’ You need to be in those communities,” Brockman remarked at the WSJ Tech conference.

Similarly, Meta President Dina Powell McCormick stressed the necessity for tech companies to more effectively advocate for the advantages of AI, stating, “I think we need to double and triple down on telling the story.”

In addition to the political and regulatory fallout from the midterms, some investors are growing increasingly concerned that the rapid surge in AI-related valuations may be heading toward a significant market correction.

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