Tech stocks came under heavy pressure in U.S. trading yesterday, Thursday. But value stocks also lost ground, in some cases significantly. Following the results of the U.S. midterm elections and the Democrats' landslide victory, fears are growing about the consequences of tighter regulation. This affects not only AI itself, but also other energy and industrial sectors.

The Nasdaq 100 tumbled 6.36 percent to 26,629.81 points over the course of trading yesterday. That brought it back to April's level. In the process, $2.3 trillion in market value evaporated.

It was only in October that the tech-heavy index reached a record high. Since the start of the year, it is still up by around 5.5 percent.

The broader S&P 500 fell 4.36 percent to 7,353.73 points. This was its steepest daily loss since April 2025.

Speculative valuations

Analysts have been warning for several months now that share prices of companies such as Nvidia, Seagate, Western Digital and Sandisk had moved far away from normal valuations. Nvidia alone lost 9.3 percent yesterday. But shares of electric car maker Tesla also fell 10.8 percent, and those of space and AI company SpaceX dropped 9.1 percent.

Correction, but not a burst

The massive expansion of artificial intelligence is heading for a correction, according to Brian Levitt, Chief Global Market Strategist at Invesco. Rising financing costs, political resistance to new data centers and excessive investment expectations are putting pressure on the industry.

However, he does not see this as an AI bubble bursting, but rather as a necessary cleanup of an overheated market.

The AI investment boom is showing cracks. After shares of many companies in the artificial intelligence ecosystem had been among the biggest winners in financial markets for years, skepticism is growing about the enormous amount of capital needed to build out the relevant infrastructure. The market was ripe for a correction.

In particular, the heavy investments in data centers, semiconductors and memory technologies are increasingly raising questions. Building AI infrastructure requires enormous sums, a lot of energy and ever more expensive equipment. At the same time, higher interest rates over the course of the year have pushed up financing costs. That is raising the bar for the profitability of new projects.

In addition, companies along the semiconductor value chain have massively expanded their capacity in order to meet the expected demand for computing power. But there is a crucial difference between long-term growing demand and short-term investment volume. In Levitt's view, individual parts of the industry may already have gone too far in their capacity planning.

Political resistance increases uncertainty

Additional uncertainty is being created by political developments in the U.S. Electoral success by Democratic candidates who are skeptical of further data center expansion could delay construction projects. This includes important states such as Texas, Ohio and Georgia. Resistance is also growing at the local level.

That could slow the expansion of AI infrastructure. However, Levitt assigns this political factor less importance than the already higher interest rates and the huge scale of planned investment. In his view, these two factors have put the pace of AI spending at greater risk than the election results.

Correction could strengthen the AI market in the long term

Levitt's long-term view of the AI market changes little. Demand for computing power is likely to keep rising, and artificial intelligence remains a major structural investment theme.

What could change is mainly the speed of infrastructure expansion. A slower and more disciplined pace of investment does not necessarily have to be negative. On the contrary, it could help bring financing, profitability and actual demand into better alignment.

This could also lead to an overshoot, for example if hedge funds and other leveraged investors cut positions and a chain reaction in selling pressure follows. Corrections could therefore be sharper than what the actual changes in the business outlook would justify.