Global stock markets are going through a period of heightened volatility. After initial optimism following the Democrats' victory in the U.S. midterm elections, investors began to reassess their positions. American technology companies are under particular pressure, while European markets show relative resilience, although significant differences are observed between sectors there as well.

The main trend of recent trading sessions is a shift of capital out of U.S. technology stocks into more traditional industries and the search for investment opportunities outside the United States.

U.S. Market: Tech Sector Hit Hardest

On Wednesday, November 4, U.S. stock indices showed solid gains after the midterm election results. However, on Thursday, November 5, the situation changed abruptly.

At the close:

  • S&P 500 fell 4.4% to 7,353.73 points.
  • Dow Jones dropped 3.4% to 51,523.06 points.
  • Nasdaq Composite lost 5.5%, sliding to 24,315 points.
  • Russell 2000, reflecting small-cap stocks, declined 4.4%.

The selloff was particularly harsh for companies related to artificial intelligence, semiconductor manufacturing, and data center construction.

Investors are concerned about the prospect of stronger regulation of the technology business after both houses of Congress came under Democratic control. In particular, the market fears restrictions on data center construction, increased electricity costs, and more scrutiny of AI investments.

As a result, market participants began to take profits on technology giants that had significantly appreciated during the AI boom.

Europe: Pressure on Tech and Defense Sectors

European stock markets also faced a correction. On Thursday, the pan-European STOXX Europe 600 index declined by about 0.6% to 653.55 points, retreating from levels near record highs.

The most notable changes occurred in the following sectors:

  • Technology. Shares of European semiconductor equipment makers came under heavy pressure. ASML dropped 7.8%, Soitec fell 17.3%, and Siltronic lost 14.5%. The reason is concerns about a slowdown in investments in AI infrastructure.
  • Defense. Rheinmetall shares plunged 16.3% after the company revised its 2026 sales forecast again. Expectations of possible easing of geopolitical tensions also weighed on the sector.
  • Mining and metals. At the start of Thursday, this sector, by contrast, showed solid gains. The basic resources index was up about 2.7%, and ArcelorMittal shares rose 6% after strong financial results.
  • Aviation and renewable energy. Air France-KLM gained 13% on good quarterly earnings, and Orsted rose 3.5%.

Thus, European investors also prefer to diversify their holdings and not concentrate solely on technology companies.

Key Factors for Future Market Dynamics

In the near term, European and U.S. stock indices will be influenced by several factors.

1. Political implications of the Democratic victory in the U.S.

The market is assessing how much the economic policy of Donald Trump's administration will change. Stronger control over technology corporations, energy projects, and government spending could lead to further shifts in sector allocation.

2. Prospects for artificial intelligence.

Investors have not given up on AI prospects, but they are starting to scrutinize the payback of huge investments in data centers, computing power, and semiconductors. This may continue to pressure stocks whose valuations have become too rich relative to future earnings.

3. Oil prices and geopolitics.

Energy costs remain an important factor for the European economy. Falling oil prices can reduce inflation and business expenses, which is positive for many European companies. However, uncertainty around the U.S.-Iran conflict continues to pose risks.

4. Central bank interest rates.

Investors will closely monitor decisions by the Fed and European central banks. High interest rates raise borrowing costs and can limit the attractiveness of equities, especially fast-growing technology companies.

Conclusion

Stock markets in Europe and the U.S. are currently experiencing a noticeable shift in investment preferences. U.S. tech stocks, semiconductor makers, and AI-related companies are under significant pressure. In Europe, defense companies such as Rheinmetall have joined them.

At the same time, investor interest is moving toward metals, selected industrial companies, aviation, and other traditional sectors.

So far, the situation looks more like a large-scale repricing of assets and capital rotation than a clear exit from the stock market. However, the sharp drop in U.S. indices shows how sensitive markets have become to political decisions and doubts about the justification of high valuations in the technology business.