AI stocks bounce back after $2.5 trillion wipe out

By Stephanie Yang, Anna Cooban, CNN

(CNN) — An AI-driven stock sell-off that wiped roughly $2.5 trillion in market value off Wall Street eased on Friday, but only after hitting Asian and European markets hard.

US tech stocks staged a rebound Friday, with the Nasdaq and S&P 500 rising 1.8% and 1%, respectively. The Dow rose 0.1%. Markets often bounce back slightly after a sell-off as some investors step in to buy stocks at discounted prices.

Some of Thursday’s hardest-hit US stocks — namely, those tied to the AI trade — were also recovering, with Nvidia trading 4% higher and SpaceX up by 6%. Both companies’ share prices plunged by roughly 9% on Thursday, with Nvidia suffering its worst day since January 2025.

Still, signs of recovery on Wall Street came after bruising Friday trading sessions in Asia and Europe. South Korea’s Kospi index and Japan’s Nikkei 225 index both closed down 6%, while Taiwan’s benchmark Taiex index ended 4.5% lower.

The moves reflected a retreat among investors from some of this year’s hottest trades. Asian tech companies, which play an integral role in the global electronics supply chain, have been buoyed by insatiable demand for components such as semiconductor chips needed to build massive AI data centers.

European indexes, which aren’t tilted as heavily toward technology stocks, also retreated modestly. The region’s benchmark Stoxx 600 index was down 1.7% shortly after 9 a.m. ET, while France’s CAC 40 and Germany’s DAX were trading 1.9% and 2.4% lower, respectively.

Stock in ASML, the Dutch maker of chip equipment and Europe’s largest company connected to the AI industry, tumbled 6.6% on Thursday, though had trimmed some of those losses by Friday afternoon to trade up 3.9%.

This week’s big swings in AI stocks underscore growing uncertainty among investors over what the results of the U.S. midterm elections means for the AI trade. Many are concerned that Democrats’ sweeping victories could stymie an AI investment boom that has powered both the economy and markets this year. A Columbia Business School study estimates that AI-related infrastructure investment was driving nearly all observed US GDP growth by the end of last year.

However, backlash against the environmental and community impact of new data centers turned AI spending into a key issue in the US midterm elections. Democrats won control of the House of Representatives and the Senate, and flipped several other contested state seats.

That sweeping victory has spurred concerns that Democratic representatives could now block or slow spending on new AI infrastructure. Those anxieties kicked off in full force Thursday, when the Nasdaq slumped 5.5%, its worst day since April 2025, when President Donald Trump announced sweeping tariffs on virtually all of America’s major trade partners.

Asia’s wild tech ride

The recent volatility builds on a year of sharp swings for Asian markets, particularly the Kospi, as investors have grappled with the sustainability of the AI boom, as well as the ultimate profitability of such steep investments.

Jung In Yun, founder and CEO of Fibonacci Asset Management Global, said Friday’s sell-off was likely triggered by investors reassessing expectations around AI investment and policy.

However, he believes demand for computing power will continue to grow, along with the need for memory chips like the ones made by Samsung Electronics and SK Hynix, the two largest publicly traded companies in South Korea.

“South Korea’s tech-heavy market is particularly exposed to shifts in sentiment, so we may see more swings before confidence settles,” he said.

Government officials in both South Korea and Japan acknowledged the recent volatility in their respective stock markets on Friday.

“I am aware share prices, particularly those of AI and chip sectors, are falling sharply,” said Japanese Prime Minister Sanae Takaichi, adding that the government was closely watching market developments. “We will focus on steps to create a strong economy.”

South Korea’s finance and economy minister Lee Hyoung-il also held a meeting Friday regarding the impact of the US midterm elections on the nation’s economy.

According to the ministry, leaders assessed that an impact on the global markets “cannot be ruled out” and that they would proactively devise measures to prevent overreactions in the Korean stock market.

Following US signals

Tech stocks around the world have been sensitive to sudden shifts in sentiment this year, as retail and institutional investors have both responded to new data or developments in AI.

“If we just focus on AI-related stocks in the market, then I would argue there has been too much of a hype earlier this year,” said Theodore Shou, partner at asset management firm Yiyi Capital in Hong Kong. “I think the market is just moderating itself.”

As excitement around AI has grown, Shou said that Asian tech stocks have become more closely correlated with their US counterparts than ever before.

However, Shou said that some market participants may be banking that a Democrat-led Congress could slow the pace of interest rate hikes, lowering the cost of borrowing, which could help boost both tech and non-tech equities.

As traders await the winners of the US midterm elections to take office early next year, analysts said global markets will likely remain sensitive to changes in tech and monetary policy.

“The thing that markets really don’t like is the uncertainty. And what they’re really saying is, we’re not sure what’s going to happen in January,” said Andrew Sullivan, who writes about Asian equities in his newsletter Asian Market Sense. “So, let’s just take a step back. Let’s put some money into cash that we can then use once the dust has settled, so to speak.”

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CNN’s John Towfighi in New York and Gage Goulding in Seoul contributed to this report.