Overview:
The Nasdaq composite declined 5.2 percent on Thursday, entering technical correction after falling more than 10 percent from its recent peak, as investors retreated from technology stocks amid concerns that stricter artificial intelligence regulations will slow data center expansion. The selloff, sparked by Democratic electoral victories in mid-term congressional elections, spread to major indices worldwide, with Japan's Nikkei 225 falling 6.7 percent and South Korea's Kospi declining over 40 percent from its June peak.
Details:
U.S. stock markets sustained sharp losses across all major indices. The S&P 500 fell 4.1 percent, registering its worst day since April 2025, while the Dow Jones Industrial Average dropped 3.2 percent, or 1,728 points. An estimated four trillion dollars in market capitalization evaporated within 100 minutes of trading. The selloff centered on semiconductor manufacturers and technology companies, as investors grew concerned that Democratic control of Congress would impose stricter environmental and regulatory restrictions on artificial intelligence infrastructure projects, particularly data center construction.
International equity markets followed suit. Japan's Nikkei 225 fell 6.7 percent to 56,971 points, marking a 20 percent decline from its June high and entering bear market territory. Semiconductor stocks Furukawa Electric and Rohm fell more than 10 percent. South Korea's Kospi has lost more than one trillion dollars in market value since June, triggering retail investor backlash after the government had actively promoted stock market investment as an alternative to real estate.
Concerns over artificial intelligence profitability extended to credit markets. Softbank Group saw five-year credit default swap spreads rise to 466 basis points, the highest in four years, reflecting heightened default risk anxiety. Space exploration company SpaceX's credit insurance costs hit record levels at 284.3 basis points annually.
Outlook:
Investors are awaiting U.S. non-farm payroll data later Friday for guidance on the Federal Reserve's future interest rate path. Goldman Sachs lowered its 2026-2027 gold price forecasts, citing expectations of prolonged high rates before eventual reductions in late 2026. Safe-haven currencies including the Japanese yen strengthened as risk appetite evaporated.