Global Markets Plunge Amid AI Fears and US Political Turmoil
Translated & summarized from Ice by baba
Global and Israeli stock markets experienced a turbulent week marked by sharp declines, particularly in AI-related stocks, following US political developments and fears of increased regulation on data centers. Major indices like the Nasdaq and S&P 500 saw significant drops, while companies like Nvidia and CoreWeave suffered substantial losses. Despite strong corporate earnings, markets reacted negatively, and a robust US labor market suggests continued interest rate hikes. The Israeli market also saw extreme volatility, influenced by both global trends and domestic political uncertainty.
The story in 5 lines · by baba
- Global markets plunged as US political shifts raised fears of AI investment regulation.
- The Nasdaq and S&P 500 experienced their worst trading day since April 2025 on Thursday.
- Nvidia and CoreWeave saw significant stock price declines amid the market turmoil.
- Strong US jobs data suggests the Federal Reserve may continue raising interest rates.
- The Israeli stock market experienced extreme volatility, influenced by global trends and domestic politics.
Global and Israeli stock markets experienced significant volatility this week, driven by dramatic political developments in the United States and their impact on Artificial Intelligence (AI) investments. The Tel Aviv 125 index, which had seen a strong gain of over 22% year-to-date in May, now stands at a modest 4% increase after a Friday rebound. This downturn affected major tech stocks, with Nvidia shifting to negative territory for the year and CoreWeave experiencing a 35% drop. Analysts at Pasternak-Shem attribute the market turmoil to two intertwined events: US political shifts and their direct implications for future AI investment.
In the US, initial optimism following Democratic control of Congress, which saw the Dow Jones surge on Wednesday, quickly evaporated. Thursday became the worst trading day since April 2025, with the Nasdaq plummeting 5.5% and the S&P 500 losing 4.36%. This panic stemmed from fears of increased regulatory risk for AI infrastructure. Analysts worry that newly empowered politicians might tighten approvals for new data centers, jeopardizing the massive capital expenditures required for AI development. This concern led to a more than 12% collapse in the semiconductor sector index on Thursday alone, severely impacting leveraged infrastructure firms like CoreWeave, IREN, and Applied Digital.
Despite strong financial results from companies like AMD and Palantir, which reported excellent earnings but saw their stocks fall, the market showed indifference. Apple reported a strong quarter with $114.5 billion in revenue but warned of lower gross margins due to rising memory component costs and AI investments. The robust US labor market, with initial jobless claims hitting a low not seen since 1969 and strong job growth in October, suggests the Federal Reserve has no immediate reason to halt its restrictive monetary policy, with markets pricing in an almost 80% chance of another interest rate hike in December.
The Israeli stock market mirrored the global volatility, with sharp declines on Thursday, including a 7.09% drop in the defense stocks index, influenced by Wall Street's fall and uncertainty over US midterm election outcomes affecting Israel. However, a significant recovery occurred on Friday, the best trading day since March, with the TA 35 and TA 125 indices rising, partly due to political statements about coalition formation progress. Looking ahead, investors will focus on the US Consumer Price Index (CPI) data and ongoing AI investment scrutiny, while political uncertainty in Israel is expected to continue impacting trading trends.
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