The Nasdaq has its worst day since Liberation Day as the Democrats’ midterm sweep puts the AI buildout in doubt

The AI trade took its biggest hit in 18 months yesterday. The Nasdaq Composite fell 5.5%, its deepest one-day drop since “Liberation Day” in April 2025, on fears that the Democrats’ midterm sweep will slow the US data center buildout, Reuters reports. The index is now in correction territory, down nearly 12% from its 6 October record. The Nasdaq 100 fell 6.4%, wiping out USD 2.5 tn in market value.

Chipmakers and data center builders fell hardest: The Philadelphia Semiconductor Index dropped 12% to a six-month low. Nvidia fell 9% and AMD 17%. Neocloud firms CoreWeave and Nebius, which rent out AI computing capacity, fell 10% and 15%. CoreWeave’s five-year credit default swap spreads, a measure of how likely investors think a default is, widened to a record. UBS estimates that c. 30% of the data center capacity expected to come online in the US in 2028 could be at risk from construction pauses, as local opposition over power and water use grows.

The Gulf is heavily exposed: Gulf sovereign funds hold stakes at every layer of AI, from the frontier labs to the data centers. Global SWF estimates Mubadala’s identifiable AI exposure at USD 24.3 bn, or 6.3% of its assets, and PIF’s at USD 12 bn, or 1.3%, the firm’s head of research Daniel Brett tells EnterpriseAM. MGX holds stakes in OpenAI, Anthropic, and xAI, and QIA has backed three straight Anthropic funding rounds. The funds’ long investment horizons let them ride out volatility, Brett says. The bigger risks are project delays and tighter chip access: from January, Democratic-led congressional committees can investigate the agreements behind the Gulf’s chip access, as we reported last week.

Oil and Gulf stocks took the election differently: Brent fell 8.7% to USD 94.62 on Wednesday and steadied near USD 98 yesterday, on expectations the result brings the US-Iran war closer to an end. Gulf bourses rose on Wednesday for the same reason, led by Qatar’s 1.8% gain. AI-linked names fell, though: Presight AI closed down 3.1%.

Two other sectors that benefited from Republican control and are in for a possible reckoning:

• Private credit: Tighter oversight is likely now that direct lending has reached almost USD 2 tn, and proposals to ease capital buffer requirements will face more scrutiny, Bloomberg reports.
• Crypto: President Donald Trump’s World Liberty Financial tokens fell 6% and his memecoin c. 19% as conflict-of-interest investigations become more likely, Bloomberg reports.

What we’re looking out for: The rout could also affect the timing of Anthropic’s IPO, which was expected this month. Investors say they might need a more attractive valuation, with the recently discussed USD 1.5 tn near the high end of expectations.

MARKETS THIS MORNING-

The rout hit stocks in Asia, with South Korea’s Kospi falling so fast at the open that trading was halted for 20 minutes, and it was still down 5.4% after trading resumed, below the 5k mark. Japan fell into a technical bear market, and Taiwan’s Taiex fell as much as 9% before paring losses to 6.7%, after the government said it could deploy its national stabilization fund. SoftBank, which has more than USD 60 bn riding on OpenAI, fell as much as 16%. Chinese stocks are doing better: Hong Kong’s Hang Seng fell as much as 1.6%.

US futures suggest some relief later today: US stock futures have turned higher after falling sharply at the Asian open. The next test is today’s October jobs report.

THE CLOSING BELL-

The ADX rose 0.6% yesterday on turnover of AED 1.9 bn. The index is down 4.7% YTD.

In the green: Burjeel Holdings (+14.5%), ADIB Rights Issue 2026 (+9.8%), and Alpha Data (+4.5%).

In the red: Ooredoo (-4.9%), Investcorp Capital (-4.6%), and United Arab Bank (-4.0%).

Over on the DFM, the index remained flat on turnover of AED 1.3 bn. Meanwhile, Nasdaq Dubai was up 3.9%.