Wall Street falls as AI trade unravels, with NASDAQ 100 leading losses

Are moratorium fears driving renewed losses in AI-focused stocks after the Democratic midterm sweep?
A broader shift towards defensive stocks has erased Wednesday's gains in the NASDAQ.

Wall Street is heading for one of its steepest declines in recent memory as AI-linked shares face another round of selling. With Democrats winning control of both the upper and lower houses, concerns have intensified that AI data centre projects could encounter fresh moratoriums and regulatory pressure.

Heavy selling is hitting the AI sector's 'pick and shovel' businesses. Fears of spillover effects are also weighing on microchip and semiconductor stocks, pushing the wider market into negative territory. A fall of around 1,400 points has left the Nasdaq tech index down 5%; losses in the S&P 500 and Dow Jones Industrial Average stand at roughly 3% and 2%, respectively.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

According to Fitch, incoming governors in Texas, Georgia and Ohio could create regulatory obstacles for a major share of planned data centre capacity. The NASDAQ 100's largest companies either build this capacity or supply it.

How is the Nasdaq 100 moving on the 5-minute chart?

Nasdaq: common questions answered

How did the Nasdaq develop?

Based in the US, the Nasdaq began as an electronic system for stock quotations before developing into a stock exchange. Its initial role was limited to quoting over-the-counter (OTC) stocks. By 1991, it accounted for 46% of the total US securities market, and in 1998 it became the country's first stock exchange to offer online trading. Several indices are also produced by the Nasdaq, including the Nasdaq 100 and its broadest measure, the Nasdaq Composite, which covers all 2,500-plus stocks listed on the exchange.

Which companies make up the Nasdaq 100?

Comprising 100 non-financial companies listed on the Nasdaq stock exchange, the Nasdaq 100 is a large-cap index. These constituents represent only a small portion of the exchange's thousands of stocks, yet account for over 90% of its movement. Each company's weight in the index depends on its market capitalisation. Technology-focused businesses feature prominently, alongside companies from other sectors and those based outside the US. Since 1986, the Nasdaq 100 has delivered an average annual return of 17.23%.

What are the ways to trade the Nasdaq 100?

Traders can access the Nasdaq 100 through several instruments. Contracts for Difference (CFD) are available for taking positions through most retail brokers and spread betting platforms. For investors with a longer time horizon, Exchange-Traded Funds (ETFs) offer share-like trading while tracking the index, removing the need to purchase shares in all 100 constituent companies. The Invesco QQQ Trust (QQQ) is one such ETF. Traders can also speculate on the index's future direction through Nasdaq 100 futures contracts. Options, meanwhile, give holders the right, without any obligation, to buy or sell the Nasdaq 100 at a specified future price (strike price).

Which Factors Influence the Nasdaq 100?

The combined performance of its constituent companies, reflected in quarterly and annual earnings reports, is the Nasdaq 100's main driver, although several other factors also matter. Macroeconomic releases from the US and elsewhere influence investor sentiment; positive sentiment, in turn, supports gains. Interest rates determined by the Federal Reserve (Fed) affect the index through borrowing costs, given many companies' heavy reliance on credit. Inflation can therefore play a significant role, alongside other indicators that shape the Fed's decisions.