Stocks rebound after tech selloff that pushed Nasdaq into correction
Stocks clawed back some of their losses on Friday after a steep selloff the previous day driven by concerns over a potential slowdown in data center construction.
The S&P 500 rose 23 points, or 0.3%, to close at 7,377, failing to erase the sharp losses it suffered Thursday on its worst day since April 2025. The tech-heavy Nasdaq Composite ended up 1.1%, while the Dow Jones Industrial Average dropped 0.5%.
"Tech is rebounding after two days of some of the most aggressive selling in a long time, although the rally is very tentative and tepid, without much aggressive chasing," Adam Crisafulli, head of Vital Knowledge, said in a note to investors midday Friday.
Financial markets soared immediately after the midterm elections earlier this week, but quickly reversed course on Thursday as investors assessed whether sweeping Democratic victories could lead to tighter restrictions on building data centers and weaker spending on artificial intelligence.
Although Democrats will control both the House and Senate when newly elected lawmakers take office in January, President Trump will retain veto authority, which will likely limit the passage of major restrictions on data centers. Opposition is more likely to surface at the state and local level, Wall Street analysts said.
As of Friday, voters had approved more than 40 ballot measures restricting data centers in communities across the country, according to an analysis from political research firm Redbud Consulting.
Tech stocks started to recover on Friday, helping pull the Nasdaq higher after a brutal beating on Thursday that caused the index to shed more than 1,400 points and enter a "correction," or when stocks fall at least 10% from their previous peak.
Chipmaker Nvidia — a bellwether for the AI sector — gained 2.5% in afternoon trading, and semiconductor manufacturer Micron Technology rose 3.9%. The so-called hyperscalers — the companies leading the data center buildout — saw modest gains, with Google-owner Alphabet climbing 0.8%, Amazon up 0.9% and Meta gaining 2.1%; Microsoft shed 0.6%.
IREN, a company that delivers data centers, compute and software for AI training, reported stronger-than-expected results for its latest quarter. Its stock jumped 19.2%, and it also announced two new contracts signed since the end of the quarter.
"We own the land, the power and the data centers under all of it, which gives us more ways to fund growth and lets us set its pace," co-CEO Daniel Roberts said.
Outside of AI, markets were mixed, and more S&P 500 stocks fell than rose.
Slowing AI investment?
A key question for Wall Street is whether AI companies will deliver the revenue growth investors are banking on. Anthropic, which filed for an initial public offering last month and is expected to debut on the Nasdaq this month, will serve as a critical test case. While filing highlighted rapid growth, the company has yet to turn a profit.
In a research note on Friday, Vicky Redwood, a chief economic adviser at Capital Economics, said the investment advisory firm expects AI to boost productivity but is "less confident that AI revenues will grow rapidly enough to sustain the current pace of investment."
The firm expects AI capital expenditures to slow next year, a development Redwood said could drag on U.S. economic growth.
The stock market rebound on Friday came after the release of the jobs report, which showed robust payroll gains in October. Employers added 165,000 last month, above economists' expectations, while the unemployment rate ticked down to 4.1%.
The burst in hiring increases the odds that Federal Reserve officials will raise interest rates at their next meeting in December and in 2027, according to Wall Street economists.
"A solid October jobs report leaves the Fed free to focus on inflation. We expect rate increases in December and March, with energy and AI spillovers the main risks to inflation," Oxford Economics said in a report.
