Asian and European stock markets dropped on Friday morning, extending losses seen in U.S. indexes a day earlier amid investor concerns that Democratic control of Congress could increase regulatory scrutiny of AI development.
Japan’s Nikkei and Korea’s KOSPI index both dropped around 6 percent, while Hong Kong’s Hang Seng and the Shanghai composite index fell around 1 percent on Friday. Major stock indexes in the U.K, France and Germany also lost around 1 percent in early trade.
Friday’s losses came after major U.S. stock markets tumbled Thursday, largely erasing post-election gains, as investors processed the impact of Democratic success in the midterm elections.
By Thursday’s close, the S&P 500, a broad index of 500 large American companies, had lost around 4 percent, while the tech-heavy Nasdaq lost around 5.5 percent amid fears that the election results could spur greater regulatory oversight of the AI-related development boom that has fueled market gains in recent months.
Early Friday, the price of Brent Crude oil, the international benchmark, jumped back up to $99 a barrel, around 6 percent higher than a day earlier when the decisive midterm results boosted hopes of a renewed push to end the Iran war. It still remains below the $117 a barrel mark from one week ago.
Tech stocks including Google parent company Alphabet, Apple, Meta, Space X and Nvidia — the chip company central to the AI boom — all lost ground in Thursday’s trade. South Korean companies Samsung and SK Hynix, which make AI chips, also saw their share price fall.
Dozens of ballot measures placing restrictions on data center development were approved in Tuesday’s elections, while states that have been hubs of data center development including Texas and Ohio will have new Democratic governors who have promised tighter regulation.
Priscilla Thiagamoorthy, a senior economist at the Bank of Montreal, said in a note after markets closed Thursday that the pullback was notable because stocks had for so long resisted “mounting economic headwinds.”
“But Thursday’s sell-off was a reminder that when expectations and valuations become stretched, even a modest shift in sentiment can trigger a swift repricing,” she added.
“The election was not a clearing event,” added Mills, using a term for an anticipated event, like an election, that removes market uncertainty and washes out weak trading positions. “It’s a starting gun for more AI regulation and more data center moratoriums.”
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