Thursday’s market selloff was the result of investors conflating the transformational potential of artificial intelligence with the investment return thesis, said David Allen, head of long/short strategies at Plato Investment Management.

The Nasdaq 100 sank 6.4%, wiping out $2.3 trillion in value as investors bailed from US technology shares on speculation that congressional Democrats will clamp down on the AI industry.

“The big hyperscalers have been locked in an existential battle,” he said in a Bloomberg TV interview with Haidi Stroud-Watts, with excessive spending testing the limits of markets. “What’s happened with the midterms really provided a catalyst for a big downward draft.”Rising bond yields were prompting investors to question whether the promised productivity and profitability dividend from AI would materialize, he said.

Read: Crowded Hedge Fund Trades Are Unwinding Fast After Ugly October Plato has been short Australian data center operator NextDC Ltd. for five years, Allen said, noting the stock fell as much as 45% in one day last month before bouncing back. He identified massive capital expenditure and the fraying of the social license required to build out data centers as the key shared vulnerabilities.

Vihari Ross, a portfolio manager at Antipodes Partners, said in a separate interview that the selloff is less of a sign of structural trouble for AI companies and more a reality check on the next leg of these investments.

“It’s going to take a ton of debt to get there — that means the price of money matters, interest rates matter, and it also relies on getting enough power, and it also relies on demand staying where it is,” she said. “Pricing in a wonderful outcome in all companies is maybe not the right answer.”