US stocks recovered some losses on Friday after a sharp selloff the previous day triggered by concerns about a potential slowdown in data center construction. The S&P 500 rose 23 points, or 0.3%, to close at 7,377, but failed to erase Thursday's steep declines, which marked the index's worst day since April 2025. The Nasdaq Composite climbed 1.1%, while the Dow Jones Industrial Average fell 0.5%. Adam Crisafulli, head of Vital Knowledge, noted that although technology stocks were rebounding, the rally remained tentative. "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," he said.
The market turbulence followed Democratic electoral victories earlier in the week, which sparked investor concerns that tighter restrictions on data center construction could emerge, potentially weakening artificial intelligence spending. Thursday's selloff drove the Nasdaq down more than 1,400 points and pushed the index into correction territory, a decline of at least 10% from its previous peak. Analysts noted that although Democrats will control both the House and Senate starting in January, President Trump's veto authority will likely constrain major restrictions on data centers. Opposition is more likely at state and local levels. According to political research firm Redbud Consulting, voters had approved more than 40 ballot measures restricting data centers in communities nationwide as of Friday.
Tech stocks led the Friday recovery. Nvidia, a chipmaker seen as a bellwether for the AI sector, gained 2.5%, while semiconductor manufacturer Micron Technology rose 3.9%. The major data center companies saw modest gains: Alphabet climbed 0.8%, Amazon rose 0.9%, and Meta gained 2.1%, though Microsoft fell 0.6%. IREN, which provides data centers and software for AI training, outperformed significantly, jumping 19.2% after reporting stronger-than-expected quarterly results and announcing two new contracts. Co-CEO Daniel Roberts said the company's ownership of land, power and data centers provided financial flexibility. Outside the AI sector, more S&P 500 stocks fell than rose.
Wall Street remains uncertain whether artificial intelligence companies will deliver the revenue growth investors expect. Anthropic, which filed for an initial public offering last month and is scheduled to debut on the Nasdaq this month, will serve as a critical test. While the company showed rapid growth in its filing, it has yet to turn a profit. Capital Economics said it expects AI to boost productivity but is "less confident that AI revenues will grow rapidly enough to sustain the current pace of investment," and anticipates AI capital expenditures will slow next year, a development that could drag on US economic growth.
The stock rebound came after the October jobs report showed employers added 165,000 workers, exceeding economists' expectations, while the unemployment rate declined to 4.1%. Wall Street economists said the robust payroll gains increase the likelihood that Federal Reserve officials will raise interest rates at their December meeting and in 2027. Oxford Economics said a solid jobs report leaves the Fed able to focus on inflation. "We expect rate increases in December and March, with energy and AI spillovers the main risks to inflation," the firm said.
For US borrowers and savers, the prospect of Federal Reserve rate increases in December and beyond means higher costs for loans and mortgages, while deposit rates may also climb.