US stock indexes fell by 3.4-6.4% amid a massive sell-off by investors of shares of chip manufacturers and AI companies

The US stock market continues to "storm" after the midterm elections in the US Congress, as investors cannot assess how the confrontation between the President and the majority of Democrats in the Senate and the House of Representatives will affect the development of the AI industry.

Yesterday, amid a massive sell-off in chipmakers and artificial intelligence (AI) companies, the Nasdaq 100 technology index fell 6.36% to a 6.5-month low, the S&P 500 index of the largest companies fell 4.36% to a 3-month low, and the Dow Jones industrial average fell 3.44% to a 3-week low.

Traders are speculating that the Democratic victory in the congressional elections could usher in a new era of regulation for the artificial intelligence industry. The outflow of capital from chipmakers' shares reflects concerns that public opposition to building data centers that consume a lot of water and energy could slow the development of both chipmakers and equipment suppliers.

Meanwhile, economic news from the US on Thursday supported the stock market. The number of weekly jobless claims unexpectedly fell to a 3-month low, indicating a resilient labor market.

Oil prices rose by more than 2% yesterday after Ukraine attacked another oil refinery and a large oil pumping station in the Russian Federation with drones, which could lead to a further reduction in global supplies of oil and petroleum products and a fuel shortage in the Russian Federation.

The stock market is supported by expectations of strong quarterly corporate earnings. According to Bloomberg Intelligence, earnings of companies in the S&P 500 index in the third quarter should grow by 31% compared to the same period last year (in July, growth was forecast at 22%). As of yesterday, 419 companies from the S&P 500 list had published their financial results, and 84% of them exceeded analysts' forecasts.

Following yesterday's collapse in US markets, South Korea's KOSPI index plunged 9% in early trading this morning, halting trading. The index is now down 47% from its all-time high.

We expect the AI bubble to "deflate" gradually, but the rate of decline may accelerate if hackers use AI to attack some large services or companies, especially after the success of AI agents in finding vulnerabilities in codes and programs over the past month.