It started with a sharp drop in US tech stocks, and by Friday the selling had spread across the globe. The Nasdaq 100 index fell 6% on Thursday, erasing about $2.5 trillion in market value in a single day. That triggered a worldwide selloff in technology shares, with Japan's Nikkei 225 and Taiwan's TAIEX both sliding into bear-market territory.
What happened?
The trigger was growing worry about the future of the artificial intelligence (AI) buildout. After the US midterm elections, it became clear that many voters are not keen on data centers – the massive facilities that house the servers powering AI. That political headwind, combined with already-high valuations, sent investors rushing for the exits.
The Nasdaq 100 didn't quite reach the official bear-market threshold – it fell 6% on Thursday, leaving it 15% below its October peak. But the damage was still severe. A $2.5 trillion single-day loss is one of the largest in history, and it set off a chain reaction across global markets.
Asia takes the hit
Japan's tech-heavy Nikkei 225 fell 6% on Friday, its worst one-day drop since the US's so-called Liberation Day tariffs in April 2025. The index is now down 9% for the week and 20% from its June peak – a classic bear-market definition.
Taiwan's TAIEX followed a similar path, falling nearly 5% on Friday and dropping 20% from its October high. Other Asian markets also felt the pain, with Singapore shares sliding 2.2% as the tech-led selloff swept through the region.
The selling wasn't confined to Asia. European markets also suffered, with the FTSE 100 sliding 2.2% as AI regulation fears and the US selloff hit London. London's blue-chip index was dragged down by tech and mining stocks.
Why AI is suddenly under pressure
For the past couple of years, AI has been the market's biggest growth story. Companies like Nvidia, Microsoft, and Alphabet have poured billions into building data centers and AI infrastructure, and investors have rewarded them with sky-high valuations.
But the midterm elections revealed a political reality: many voters don't want data centers in their backyards. Concerns about energy use, water consumption, and local disruption have made data centers a contentious issue. That raises questions about how quickly the AI buildout can continue, and whether the massive spending will pay off.
There are also broader worries that AI stocks have become a bubble. A recent survey showed that US consumer mood is improving, but AI bubble worries are growing. Investors are starting to ask whether the earnings will justify the valuations.
What it means for investors
For everyday investors, a bear market in tech stocks can feel alarming, especially if you have money in index funds or retirement accounts. But it's important to keep perspective. A 20% decline from a peak is a normal part of market cycles, and tech has seen many such pullbacks before.
One key thing to watch is whether the selloff spreads to other sectors. Already, copper is heading for its worst week since March as the tech selloff cools demand hopes. That suggests the pain could extend beyond pure tech stocks.
Another factor is interest rates. The AI selloff, combined with an oil price spike, has shaken rate-cut bets for the Federal Reserve and the European Central Bank. If central banks delay rate cuts, that could put further pressure on high-growth stocks.
Investors have also been moving money into safer assets. The US dollar has firmed as investors seek safe havens, and volatility has spiked. However, there are early signs of stabilization – Nasdaq futures bounced and the VIX eased after the initial shock, suggesting some buyers are stepping in.
The bottom line
Bear markets are a normal part of investing. While the current selloff is painful, it's also a reminder that markets don't go up in a straight line. For long-term investors, the key is to stay diversified and avoid making impulsive decisions based on short-term swings.
As always, it's wise to keep an eye on the fundamentals. If AI companies continue to deliver strong earnings, the selloff could be a buying opportunity. But if the political and regulatory headwinds intensify, the bears may have more room to run.
