- Thursday’s technology rout was led by a sharp policy-driven expectation reset following US midterms
- Markets are pricing higher friction on new data-centre build-outs
- Technology remains strategically important for US growth and ecosystem development
- Near-term volatility is likely, reinforcing the importance of diversified strategies
- Strategically important semiconductor ecosystem and hyperscalers look increasingly appealing
An abrupt technology reset. The latest sell-off in technology and AI-related stocks marked one of the more violent single-session resets of the year. The NASDAQ 100 fell sharply by 6.4% on Thursday (5 Nov), marking its worst day since Liberation Day (2025), while the S&P 500 slid 4.4%. Semiconductors bore the brunt of it with the SOX Index plunging more than 12% in a single day.
Digesting post-election policy risks. The immediate catalyst was the Democratic midterms sweep and associated risk of tighter scrutiny, slower permitting, and potential constraints on new data-centre construction. The markets are right to digest these policy implications as data-centre opposition was indeed featured prominently in multiple state races and ballot measures, and the prospect of higher friction on incremental capacity is a legitimate near-term consideration for the AI investment cycle.
That said, the magnitude of the move appears overdone relative to what is knowable. Political risk around data-centre build-outs and AI infrastructure was not an unanticipated shock; investors had been weighing regulatory, power, and community pushback for months, and valuations in parts of the complex had already begun to compress. The session’s intensity was amplified by swings in positioning dynamics, including elevated leverage in crowded AI trades and reports of deleveraging and margin-related forced selling. In short, the market is right to reprice incremental policy risks, but the speed and breadth of yesterday’s decline suggest a degree of overshoot.
A slowdown in growth at worst, rather than an end to the trade. Technology remains a strategically important sector for the US, both as a material contributor to GDP growth in recent years, and as a foundation for long-term competitive positioning in AI, semiconductors, and advanced computing. A slower pace of data-centre construction would temper the most aggressive near-term capex assumptions, but it does not extinguish the underlying secular investment narrative. Demand for compute capacity has not disappeared; constraints on new supply can even increase the scarcity value of existing infrastructure.
Diversification is key to navigate choppy waters. Near-term volatility is likely to persist as investors parse state-level permitting rules, federal legislative signals, and company-specific commentary on capacity plans. Rationalisation should ultimately prevail once the initial policy uncertainty is better calibrated against actual project timelines and corporate responses. In this environment, the prominence of a diversified strategy is clearly underscored.
Strategically important giants on sale. For equities, we continue to advocate selectivity through the CIO I.D.E.A. framework (Innovators, Disruptors, Enablers, Adapters). Quality and strategically important themes, particularly in IC design and core semiconductor platforms, have become more appealing on valuation after the recent sell-off and merit close monitoring as volatility creates entry points, while the earnings trajectory remains largely intact. Hyperscalers, as mentioned in our previous notes, stand to be relative beneficiaries of any policy-driven slowdown in new data-centre construction. Existing compute capacity would become more valuable under tighter supply conditions, and a more measured build-out pace could reduce the near-term financial burden associated with aggressive capital deployment.
Overall, the episode is best viewed as a necessary digestion of political and capacity risks, rather than a fundamental rejection of technology’s strategic role. Disciplined focus on quality, diversification, and the distinction between slowing and extinguishing the AI investment cycle should help navigate the period ahead.
Figure 1: The S&P 500 and NASDAQ staged their steepest daily declines since Liberation Day 
Source: Bloomberg, DBS
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