US stocks seek reset after election-fueled AI sell-off

Tech stocks clawed back some ground early Friday after their worst rout in 19 months, though a surprisingly strong jobs report and fresh doubts over the AI boom kept Wall Street on edge.

The tech-rich Nasdaq suffered its worst one-day decline in 19 months on Thursday, entering correction territory.

Investors are worried that a Democratic-controlled Congress after this week's midterm elections could bring tougher regulation of AI.

In early trading a day later, the Nasdaq Composite Index rose 1.85 percent to 24,763.96 points, while the broad-based S&P 500 gained 0.3 percent to 7,378.6, recovering only a fraction of Thursday's losses.

The Dow Jones Industrial Average still slipped, falling 0.34 percent to 51,350.11.

"Thursday's session was like having the rug pulled out from under you after having had the welcome mat laid down for you on Wednesday," said Patrick O'Hare of Briefing.com.

"The market is hoping to hit a reset button today, yet the path ahead is anything but clear with all the dust that has been kicked up since the election," he added.

Stephen Innes of SPI Asset Management said the AI industry may have the money to build data centers, "but it still needs local communities and regulators to permit them."

Political opposition could slow approvals and raise electricity and financing costs, Innes said, adding that "none of this necessarily kills the AI investment cycle. But it changes who is likely to capture the returns."

The US economy added 165,000 jobs in October, far above the roughly 59,000 analysts expected, while the unemployment rate dipped to 4.1 percent from 4.2 percent, according to the Labor Department.

Traders increased bets that the Federal Reserve will raise interest rates in December after the report.

"This clearly sets the Fed up very well to continue to bring their target rate higher to address inflation," said Larry Holzenthaler of Catalyst Funds.

Among individual companies, chip stocks bounced back after Thursday's rout, with Nvidia up 6.1 percent and Micron up 6.5 percent.

Airbnb surged after raising its full-year revenue growth forecast.