'A true panic': What Wall Street is saying about Thursday's selloff
Investors are fleeing AI stocks after the midterms / Photo: X / NYSE
U.S. stocks sold off sharply on Thursday after surging a day earlier. At the time of this writing, the tech-heavy Nasdaq Composite was down almost 4%, the S&P 500 almost 3%, and the Dow Jones Industrial Average more than 2%.
The selloff was driven primarily by growing doubts about whether tech companies’ massive investments in AI infrastructure will deliver the expected returns. Increasing reliance on debt to finance data center construction has added to those concerns. Investors also fear that Democrats in Congress and in state capitals could pause or ban construction of new data centers. Here is what Wall Street analysts are saying about the selloff in AI stocks.
“This is a true panic. This is 100% about the chip stocks and the potential slowdown in the AI trade,” Jay Hatfield, CEO at Infrastructure Capital Advisors, told the Wall Street Journal.
The correction that the Nasdaq 100 entered this week could spread to the other major stock indexes, in the view of Steve Sosnick, chief strategist at Interactive Brokers. “Certainly we went too far, too fast yesterday,” he told MarketWatch. “FOMO played a large part in the move. Today, it’s just plain old nasty.”
“The rotation out of chipmakers reflects growing concern about the pace and funding of AI spending due to the risk of more regulations after the blue wave,” Chris Murphy at Susquehanna International Group told Bloomberg.
“There is now a chance that the two years of extra push from the Trump government for AI buildout will somehow be scaled back,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told Reuters. She also noted that the current White House had largely ignored several issues surrounding investment in the industry.
Money has begun rotating into value and dividend-paying stocks, reckons Bob Edwards, CEO and chief investment officer at Edwards Asset Management. The AI trade is here to stay, but it remains volatile, and investors should not overlook some of the more boring areas of the market, he told Bloomberg.
“Stay invested in diversified equities,” Ulrike Hoffmann-Burchardi at UBS Global Wealth Management told Bloomberg. “Strong earnings, resilient economic growth, and robust demand for AI infrastructure continue to support our constructive view.”
