Wall Street Rebounds as AI Power Faces Regulation Fears

The Nasdaq Composite climbed 421.2 points, or 1.73%, to 24,736.2 at 10:21 a.m. ET on Friday. Chip stocks bounced after a brutal selloff, while markets weighed the prospect of tighter AI regulation. The rebound restored some value to technology companies, but it didn't erase Thursday's steepest Nasdaq drop in 19 months.

Markets Move on Political Power

Democrats' midterm election victory, including in some key data-center states, helped trigger the selloff. Investors worried a Democratic-led Congress could impose tougher rules on artificial intelligence and slow construction of AI data centers. The sector's growth had helped push stock markets to record highs this year, leaving those valuations exposed to a change in political direction.

Thursday's decline put the Nasdaq in correction territory, and the index was headed for a fourth consecutive weekly fall. On Friday, the Dow Jones Industrial Average held at 51,530.05, while the S&P 500 gained 72.56 points, or 1%, to 7,426.29. Six of the S&P 500's 11 sectors traded higher. Information technology led. Consumer staples and health care lagged.

The central political question is whether a Democratic-led Congress might regulate AI more tightly and slow data-center building. The article reports investor concern, not an enacted rule or legislative outcome. Markets have climbed on the promise of rapid AI growth, and even the possibility of public oversight rattled prices.

The Chip Rebound, the Losses

Nvidia rose 5.6% Friday after suffering its worst day since January 2025, when the emergence of the low-cost Chinese AI model DeepSeek rattled Wall Street. The semiconductor index gained 4.6%, recovering after losing more than 12% in the previous session. AMD, Intel and Micron Technology rose between 3% and 10.5%.

Data-center operators IREN and Applied Digital, neoclouds CoreWeave and Nebius Group, and AI-exposed utilities and equipment suppliers GE Vernova and Constellation Energy also recovered from deep losses. The bounce reached beyond chipmakers, tracking the network of firms tied to AI infrastructure.

Tesla, led by Elon Musk, rose 5.5%, while SpaceX gained 6.3%, after both fell sharply in the previous two sessions. Atlassian, a software firm, dropped 14.7% after reporting first-quarter results. Airbnb gained 9.4% after raising its full-year 2026 revenue growth forecast.

Rates, Jobs and Market Nerves

U.S. nonfarm payrolls increased more than expected in October, and unemployment fell to 4.1%. The report suggested a resilient labor market, but it also raised concern about interest-rate hikes. Traders priced in a 78% chance of a Federal Reserve rate move in December, up from 70% earlier.

“Those are strong numbers and normally that would say that the Fed would have to be more on the hawkish side,” said Joe Saluzzi, co-head of equity trading at Themis Trading. He added: “The flip side of that is that what we saw yesterday and how volatility has spiked, will the Fed want to raise interest rates in the face of a market which is teetering?”

The CBOE Volatility Index eased to 23.88 Friday after its biggest one-day jump in about 19 months on Thursday. A jump in crude oil prices had pressured equities amid concerns about energy-fueled inflation and higher rates from global central banks. Brent crude futures edged lower Friday, with oil prices set for sharp weekly declines; the S&P 500 energy index was on track to fall more than 11% for the week.

The S&P 500 was on pace for its worst week since March 2025, when concerns about the Trump administration's tariff policies roiled global markets. Wall Street's numbers swung again. Firms and traders tied to AI, rates and energy remain the ones setting the market's mood. The Nasdaq stood at 24,736.2 at 10:21 a.m. ET Friday.