Image source: Bloomberg via Getty Images
Big tech from America, Europe and Asia. The value of shares of companies has fallen by several trillion dollars.
After the midterm elections in America, the fear of slowing down the pace of development of Artificial Intelligence (AI) has increased.
In America, the Nasdaq stock index based on tech companies fell by 5.5 percent on Thursday.
Due to this, the total value of companies in the market decreased by about 2.5 trillion dollars. A huge decline was also seen in America's other major stock indexes.
Investors are worried that strict rules may be imposed on AI. This is because Democratic Party candidates have opposed the data centers that are needed to run this technology.
This fall in shares has come amid concerns whether the companies will benefit much from the huge money being spent on AI or not.
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Due to the fall in the US stock market on Thursday, the group of tech companies, which is called the 'Magnificent Seven', suffered a loss of about one trillion dollars. This includes companies like Apple, Nvidia and Tesla.
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Nvidia's shares fell by more than nine percent. Other chip making companies also suffered losses. Shares of both MD and Micron fell by more than 17 percent.
Shares of Elon Musk's companies SpaceX and Tesla also fell drastically. SpaceX's shares fell by 8 percent and Tesla's shares fell by about 11 percent. This reduced the total market value of these companies by more than $300 billion.
Musk had spent about $450 million to support the election campaigns of the Republican Party. This also included $45 million given in support of Ken Paxton for the Texas Senate seat. But the seat of Texas is also included in the big victory of the Democratic Party.
Due to the huge fall in Nasdaq, its total value in the market reduced by about 2.5 trillion dollars.
Now this index has reached a situation which stock market experts call 'correction'.
This means that the price of an index or company has fallen by at least ten percent from its recent highest level.
However, in the recent past, due to increased enthusiasm about AI, there was a significant rise in the shares of tech companies.
Therefore, even after Thursday's fall, the situation of Nasdaq is better than a year ago. There has been an increase of about 4.6 percent since the beginning of this year.
Impact visible till Asia and Europe
Image source, WANG ZHAO/AFP via Getty Images
The impact of the fall in the American stock market on Friday reached Asia. Japan's Nikkei stock index closed six percent lower.
Shares of memory chip manufacturing companies Kioxia and Tokyo Electron also fell heavily.
At one time South Korea's Kospi index fell by more than eight percent.
After this, 'circuit breaker' had to be implemented in the stock market there. This is a system in which buying and selling of shares is stopped for some time to prevent panic selling.
Ultimately the Kospi index closed with a decline of six percent. Shares of chip maker SK Hynix fell by more than 10 percent.
European stock markets also opened with a decline on Friday. However, the decline there was not that much because the number of shares of tech companies in these markets is less. Britain's FTSE 100 index fell 1.6 percent, while Germany's DAX index was down 1.3 percent.
Dan Coatsworth, head of markets at AJ Bell, said investors are concerned about the huge amount of money being spent on AI, because it is not yet clear when and how much this spending will pay off.
He further said, "The midterm results have further complicated the situation. Now the influence of the Democrats has increased. They can slow down the pace of construction of data centers and consider making new rules for this sector."
He said, "The whole story of AI so far has been based on rapid progress. But now there is a danger of its pace slowing down and some things in this whole system going wrong."
pressure on data centers
Image source, MANAURE QUINTERO/AFP via Getty Images
Democratic Party candidates contesting elections in different areas of America had talked about slowing down the increasing expansion of data centers and AI.
Dozens of such proposals were also put forward during voting across the country, the aim of which was to ban or limit the construction of these centres. These centers are very important to run AI technology.
In the midterm elections held on Tuesday, the Democratic Party won both the US Senate and the House of Representatives. In this way, control of both houses of Parliament went to the Democratic Party for the remaining period of President Donald Trump's tenure.
"Americans do not want the powerful owners of big tech companies to harm the environment, destroy jobs, and jeopardize the future of humanity. There should be an immediate ban on the construction of data centers across the country," Democratic Senator Bernie Sanders said in a post on the social media platform X on Thursday.
In a post on social media, Trump held his political opponents responsible for the fall in the stock market.
"Based on the election results, this was one of the worst days in the history of the stock market," he said.
He further wrote, "Remember, this did not happen because of the Republican Party, but because of the Democrats. Don't worry though, somehow we will soon be bigger and stronger than ever before. Make America great again!"
From a social post it appears that he also targeted the voters.
He wrote on his social media platform Truth Social, "The stock market fell today because the Democrats got a big victory on Tuesday. It's sad to see. You yourself are responsible for this!"
Some leaders of tech companies have said that they were surprised to see people's anger against data centers in the midterm elections.
Greg Brockman, president and co-founder of OpenAI, believes that everyone was surprised by people's reaction to data centers.
He said more work needs to be done to ensure that local people also support these projects.
"We've learned a lot this year," Brockman said Wednesday evening at the WSJ Tech Conference in Napa, California. "To build data centers from San Francisco to Texas, Georgia and other places, it's not enough to just post on social media and say it will be beneficial. You have to go among the people there and convince them of your point of view."
With additional reporting by Lily Jamali.
We used AI to translate this article, which was originally written in English. A BBC journalist checked this translation before publication. Learn more about how we're using AI.
Published by Collective Newsroom for the BBC.
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