What happened
Global stock markets have had a turbulent couple of days. On Wednesday, US equities had climbed strongly after the US midterm elections, as investors welcomed an end to political uncertainty. On Thursday, that rally went sharply into reverse.
The S&P 500 fell 4.4%, its worst day since April 2025. The technology-heavy Nasdaq fell 5.5% and is now more than 10% below the record high it set in early October[1]. The selling spread to Asia overnight [2].
UK and European shares have been less affected, although the FTSE 100 had fallen by around 2% as of early afternoon on 6 November [3].
The VIX, often called Wall Street’s “fear gauge”, measures how much investors expect share prices to swing. It jumped around 70% on Thursday, its biggest one-day rise in almost two years. However, it remains below the levels reached during the most stressful periods earlier this year [4].
Markets are already showing signs of reversing some of these moves on Friday, particularly among AI-related stocks. This is a fast-moving situation, and we expect sentiment to remain sensitive to further developments from Washington, individual states and companies themselves.
What has caused the volatility
The main trigger was investors rethinking what the election result could mean for artificial intelligence (AI).
Much of the global market’s recent growth has come from companies building and supplying AI, particularly the large data centres that power it.
These facilities use significant electricity, and rising energy bills made them an election issue. Several successful candidates have called for limits or pauses on new data-centre construction. They include the incoming governor of Texas, the state with the largest share of planned projects[5]. Investors worry this could slow spending on AI and hurt the companies whose profits depend on it.
Markets were already nervous. Technology shares fell in October on doubts about whether AI spending could keep growing at its recent pace, and some disappointing company results added to the pressure. Interest rates also remain high: the Bank of England raised rates again on Thursday for the first time in three years [6].
However, the picture is already becoming more nuanced. Comments from the incoming Texas governor suggest the focus is on introducing protections for local communities rather than stopping data-centre development altogether. Projects already approved may be less affected than new applications, although the precise implications for future capacity remain uncertain.
Meanwhile, corporate announcements, including a substantial share buyback programme from semiconductor equipment manufacturer Lam Research, have helped support a recovery in AI-related stocks on Friday.
The speed of this reversal highlights just how sensitive markets are to new information, and why it is too early to draw firm conclusions about the longer-term implications for AI investment.
Sarasin view
Fiona O’Neill, Head of Investment – Global Equities
We have seen a pretty sharp reversal in leadership over Wednesday and Thursday. Momentum and AI infrastructure companies were hit hard, while value, low volatility and more defensive stocks performed well. Interestingly, the hyperscalers initially benefited on Wednesday before the selling broadened on Thursday.
But Friday is already looking rather different, with AI stocks recovering some of their losses as further announcements emerge. I think we need to be careful not to extrapolate too much from a couple of days of market moves. This is clearly a fast-moving situation and we expect it to remain so.
For us, the question is less about whether AI is a genuine structural opportunity, which we continue to believe it is, and more about the pace of investment, how it is funded and ultimately who makes the money. These are not necessarily the same thing.
Data centres are a good example. There is clearly growing political and local opposition, particularly around power prices and infrastructure. But we do not think that means data centres will not get built. It may simply mean they take longer and developers have to do a better job of bringing communities with them. In many ways this reminds me of mining, where getting local buy-in is critical. There may be some near-term disruption to the pace of development, which clearly matters for the suppliers into that build-out. But longer term, a more measured approach could actually improve the economics for the hyperscalers. The interesting question is whether markets focus on potentially slower revenue growth or better returns on capital. And importantly, as more detail emerges, the impact on actual investment plans may prove less significant than the initial market reaction suggested.
In terms of Sarasin portfolios, we are not panic trading, nor are we indiscriminately buying the AI sell-off. Some of the stocks that have fallen sharply have still only given back part of their substantial gains this year and are not necessarily cheap.
We are continuing to look selectively at opportunities, but want to be confident in both the earnings outlook and the valuation we are paying. The recent volatility reinforces the need to distinguish between the companies supplying the infrastructure and those ultimately capturing the economic value – something we have been discussing with our refined philosophy.
Key points: what we are watching
The AI investment cycle. We are monitoring hyperscaler capital expenditure, data-centre approvals and the potential for delays as political and community scrutiny increases. The Loudoun County vote on 17 November on whether to pause data-centre applications in Northern Virginia[7], the world’s largest data-centre market, will be one indicator of the direction of travel. Equally, we are watching how quickly developers and policymakers can find workable solutions. The long-term opportunity remains substantial, but the path may become less linear.
The financing of AI. The potential Anthropic IPO is an important sentiment test. A delay, disappointing valuation, or failure to complete a transaction could reinforce concerns about the sustainability of AI investment and place further pressure on the wider trade. Equally, corporate announcements and capital allocation decisions may help restore confidence. We expect markets to remain highly sensitive to both positive and negative news.
Affordability at the centre of policy. We expect healthcare costs, electricity prices and household affordability to become increasingly important political priorities. Congressional investigations could also create company-specific risks, while the administration retains significant freedom of action on foreign policy, tariffs and military matters.
Geopolitics. Escalation involving Iran remains a material risk, with potentially significant implications for oil prices, inflation and equity markets. A more difficult domestic political environment could also increase the administration's focus on foreign policy during its remaining two years.
Our approach remains unchanged: stay disciplined, avoid reactive trading and use market dislocations selectively where conviction in earnings and valuation supports the opportunity. The structural opportunity in AI remains compelling, but the market is likely to continue reassessing the pace of investment and where the returns ultimately accrue. Our job is to ensure we own the right businesses, where we believe in the earnings, and at the right price.
[1] https://www.investing.com/news/economy-news/trading-day-a-november-5-market-bonfire-5005919, 5/11/26
[2] https://www.brecorder.com/news/40447714/asia-stocks-crumble-after-ai-rout-rocks-us-markets, 6/11/26
[3] https://www.telegraph.co.uk/business/2026/11/06/ai-stocks-rout-data-centres-semiconductors-ftse-100-markets/, 6/11/26
[4] https://finance.yahoo.com/markets/live/stock-market-today-thursday-november-5-dow-sp-500-nasdaq-plunge-chip-stocks-melt-down-193726491.html, 6/11/26
[5] https://www.cnbc.com/2026/11/04/ai-stocks-texas-governor-data-centers.html, 4/11/26
[6] https://www.bankofengland.co.uk/, 5/11/26
[7]https://wjla.com/news/local/loudoun-county-data-centers-development-applications-board-supervisors-pause-northern-virginia-regulations-leesburg-catoctin-grid-reliability-dominion-energy-merger-power-lines-laws, 16/09/26
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