AI sentiment sours as Democrats’ midterm win sets in

Stocks on Wall Street were routed with steep declines for chipmakers including Nvidia and Intel as investors prepared for a likely slowing of the artificial intelligence infrastructure build-out.

European markets were more subdued as the Bank of England hiked its benchmark interest rate as expected, with governor Andrew Bailey signalling more were likely if inflationary pressures don’t abate, while UK prime minister Andy Burnham said he might need more time to put forward his 10-year plan for where he wants Britain to be.

Oil prices bounced from yesterday’s sharp decline, when US President Donald Trump accepted the Iran war was partly to blame for the weak showing by the Republican Party in the midterm elections, with reports that Iran was reviewing new proposals that could pave the way for renewed peace talks.

And Australian futures are pointing to a soft start to the day for the ASX, while New Zealand prepares for Saturday’s general election with polling showing a neck-and-neck race between the competing blocs.

The day after

US stock markets reversed their initial spike on the US midterm elections and slump in oil prices, as the Nasdaq Composite sank 5.4% in late trading and the S&P 500 slid 4.1%, with double-digit declines for the likes of Micron Technology, Advanced Micro Devices, CoreWeave, SanDisk, and Marvell Technology.

The Dow Jones Industrial Average dropped 3.2%, with Nvidia leading the blue-chip index lower as it fell 8.7%. Cisco Systems was down 6.8% and Goldman Sachs fell 6.7%.

“This is no longer just a handful of technology stocks coming under pressure,” Moomoo market strategy consultant Greg Boland said in a note. “Investors are reassessing the entire AI infrastructure trade, from chips and memory to data centres and power suppliers.”

The Cboe volatility index, known as Wall Street’s fear gauge, jumped 55% to 25.76, its highest level since April, while Bitcoin tumbled 5.3% to US$75,817.

SpaceX dropped 9% and Tesla sank 12% as the Elon Musk-led companies extended their declines, while local favourite Rocket Lab sank 13% to US$45.57, its lowest level since December last year.

Still, Reuters reported OpenAI president Greg Brockman confirmed the ChatGPT developer’s sales were growing, and it was on track for an initial public offering next year.

And Google, Meta Platforms and TikTok have sued California to block the enforcement of a new state law prohibiting the platforms from offering underage children features that could lead to compulsive use, such as autoplay and personal recommendations.

Not so dour

Across the Atlantic, stock markets were more muted. The UK’s FTSE 100 and Germany’s DAX both slipped 0.4%, while France’s CAC 40 increased 0.3%.

German ammunition maker Rheinmetall tumbled after cutting its sales forecast for the second time this year, while AP Moller-Maersk declined after the shipping group’s upgraded earnings guidance disappointed investors.

The Bank of England hiked its base rate 25 basis points to 4%, the first increase since 2023, with policymakers warning more may be needed to stave off inflationary pressures from the energy shock caused by the Middle East conflict.

Meanwhile, UK prime minister Burnham said his 10-year vision for the country might not come until December or January.

Brent crude oil futures increased 2.9% to US$97.35 a barrel, recovering some of yesterday’s slide. The New York Times reported that Iran was reviewing proposals that could shape its nuclear programme, in what was seen as a potential breakthrough in reviving ceasefire negotiations.

Australian futures are pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar fell to 56.13 US cents at 7am in Auckland from 56.52 cents yesterday.

No local data are scheduled for today, while Spark New Zealand, Marlin Global, Colonial Motor Co and Tourism Holdings are holding their annual meetings.

And the Labour Party edged ahead in the latest The Post/Freshwater Strategy poll before Saturday’s general election, with the left and right blocs running neck-and-neck into the final voting day. Labour was up 2 points to 30.4%, while the National Party was down 1.2 points at 26.4%.

Thinly traded Polymarket contracts price a 56% chance of Christopher Luxon being prime minister and put a 50% chance of a National-Act-NZ First coalition forming government.

Reporting by Paul McBeth. Image from Andy Feliciotti on Unsplash.