US Stock Market Plummets: AI-Related Company Stocks Lose Billions After Elections

Last night, the American market experienced its toughest day in 19 months, driven by concerns over artificial intelligence (AI) regulation. The S&P 500 index plummeted by 3.77 percent or 290 points, while the Dow Jones fell by more than 3 percent or 1,600 points. Nasdaq dropped by 5.52%, reaching 24,315.00 points.

As a result of this significant decline, investors incurred losses amounting to $2.9 trillion, equivalent to approximately 270 lakh crore rupees. Among those affected were Nvidia shares, which fell by 9 percent, and Micron Tech shares, which declined by 17 percent. The semiconductor ETF segment showed a drop of over 70 percent.

The Nasdaq Composite closed more than 10 percent below its record closing level on October 6, confirming a technical correction. The largest decrease was recorded among chip manufacturers supplying components for AI data centers. Furthermore, after rising on Wednesday, other major tech companies also experienced declines: Meta Platforms fell by 4 percent, while Amazon.com and Alphabet (GOOGL.O) dropped by 2.2 percent. According to Reuters, this marked the largest single-day drop in 19 months.

The primary reason for such a massive decline was investor anxiety following the Democratic Party's victory in the US midterm elections. Concerns arose that new restrictions might be imposed on expanding AI infrastructure and data centers. This called into question future revenues and large investments in AI companies, triggering an active sell-off of chip company stocks and intensifying the crash.

Regarding the Indian market, the Gift Nifty indicator is currently in negative territory, signaling a fall of 127 points, which could lead to the Indian market opening lower. However, experts suggest that due to India's lesser dependence on AI, the decline will not be as sharp as in the American market. It is worth noting that the Indian market had shown continuous growth over the past six days, causing its market capitalization to exceed 5 trillion. However, signs of decline are visible today.

A significant decline was observed in the American market late in the evening. The main US index, S&P, fell by 2.06 percent. Intel shares dropped by 28 percent, and the quotes for NVIDIA, AMD, DELL, and HP also decreased significantly. Because of this, the composite Nasdaq index closed down by 2.86 percent.

This sharp drop has caused alarm among global investors, as there is a suspicion that the artificial intelligence (AI) bubble in the US is beginning to burst. A similar trend was also observed in the Chinese market over the past few months, where shares of companies related to AI investments showed a strong decline.

The Shanghai Stock Exchange's technology index (STAR 50) lost about 40 percent in less than four months, equivalent to a loss of approximately $3.5 trillion. In China, there has also been a substantial fall in the shares of the AI and semiconductor sectors, and this decline continues. A similar scenario is unfolding in the US market, where up to $1.8 trillion was lost in just one day.

The largest single-day drop in the Nasdaq composite index since June 5th occurred on Friday. This was attributed to poor quarterly reports from Intel and Amazon. After these results were published, it became clear that the returns from massive AI investments did not meet expectations, which triggered active profit-taking in these stocks. Questions have previously been raised about when AI investments will start yielding profits, whether this approach is correct, and if AI will provide future benefits; answers to these questions have not yet been found.

Since the financial performance does not meet expectations, investors are disappointed, and there is a view that the AI bubble may burst soon. This sentiment led to the serious decline in the American market on Friday.

The Nasdaq composite index closed on October 30 at 25,437 points, down 747 points. The S&P 500 also fell by 2.06 percent, ending trading at 7,581. The Dow Jones Industrial Average decreased by 572 points, representing 1.09 percent, reaching 51,770. This decline may affect global stock markets on Monday, November 3rd. A particularly sharp decline is possible in the South Korean and Taiwanese markets, as growth in these markets largely depended on technology stocks.

Alphabet, the parent company, experienced one of the largest crashes in history. Following its latest earnings report, Alphabet's shares fell by 13%, resulting in a $500 billion loss, causing turmoil among retail investors and the global technology ecosystem.

This market shift occurred as Alphabet's report provided the market with insight into the mechanisms behind the artificial intelligence explosion. Such a sharp decline could potentially completely change the funding landscape in the AI sector.

Despite this, Alphabet demonstrated impressive achievements on paper. Google Cloud revenue significantly grew, doubling year-over-year to an impressive $30.7 billion. Furthermore, the flagship Gemini AI application surpassed the billion-user mark.

Typically, such figures contribute to stock price growth. However, traders focused not on revenue but on expenses. The search giant's spending more than doubled, reaching a colossal $51.4 billion. This aggressive infrastructure build-up led the company to its second consecutive quarter with negative free cash flow, amounting to a loss of about $9.1 billion.

As a result, Alphabet completely suspended its share buyback. Instead, the company had to raise immediate capital through new debt and the issuance of new shares. The market reacted extremely negatively, triggering the 13% stock drop.

Experts note that we are rapidly entering a more cynical phase of the tech boom. Building massive data centers and laying the hardware foundation for advanced machine learning is inevitably expensive. Nevertheless, leading analysts are beginning to ask difficult questions about immediate return on investment, representing the innovator's dilemma in practice.

Institutional investors fear that new chat interfaces may begin to displace Google's traditional search business, which has been their primary source of income for decades. There is a growing fear that AI-generated queries lead to significantly fewer advertising conversions. When CFO Anatol Ashkenazi calmly stated that capital expenditures would likely increase substantially again in 2027, panic set in, and traders began mass selling assets at a speed unseen since 2004.

This incident is not an isolated problem for Alphabet; it reflects a harsh trend across the entire industry. When a large, highly-rated company records the second-largest daily market capitalization loss in US stock history, venture capitalists closely monitor the situation. For agile tech startups and corporate innovators, the era of 'growth at any cost' is over. Today, investors demand clear and high-yield monetization paths. Alphabet's warning serves as a signal to everyone presenting AI startups, requiring clear proof of product profitability without excessive consumption of server computing power.