The postelection rally on Wall Street lasted barely a single session. By Thursday afternoon, the Nasdaq Composite had tumbled 5.4% and slipped into correction territory, closing more than 10% below its Oct. 6 record. Investors dumped chip and data-center stocks on expectations that the Democratic sweep in Tuesday's midterms—including victories in several states that host major data-center hubs—will slow the artificial-intelligence infrastructure boom. The narrower Nasdaq-100 had already confirmed a correction on Monday.
The S&P 500 fell 4%, putting it on track for its steepest one-day drop since the April 2025 tariff rout. The Dow Jones Industrial Average lost 1,711 points, or 3.2%, erasing Wednesday's gain of more than 1,500 points. Every sector in the S&P 500 finished lower.
Why AI stocks are reeling
With Democrats winning control of both chambers of Congress and several governor's races, investors are pricing in tougher scrutiny of the power-hungry data centers that underpin the AI trade. Sen. Bernie Sanders of Vermont, who caucuses with Democrats, has called for a national moratorium on new data centers.
“Investors appear to be recognizing that some newly elected members of Congress and governors are looking to slow the pace of AI infrastructure development,” said Melissa Brown, global head of investment decision research at SimCorp. “While it seems unlikely that they will be able to stop it altogether, any slowdown would raise concerns because the AI growth story has largely depended on the rapid buildout of supporting infrastructure.”
The Philadelphia SE Semiconductor index sank nearly 10%. Nvidia and Broadcom each fell 9%, and Oracle lost 8%. Qualcomm dropped 11% after its fourth-quarter smartphone chip sales missed Wall Street estimates. Neocloud providers CoreWeave, Nebius and Iren lost between 13% and 17%. AI-exposed utility and equipment stocks such as GE Vernova and Constellation Energy also fell sharply. Tesla and SpaceX, both led by Elon Musk—who spent nearly half a billion dollars backing Republican candidates—slid 9% and 11.4%, respectively.
At a loss of about 5.2%, the Nasdaq-100 was on pace to erase more than $2 trillion in market value. “This is a true panic,” said Jay Hatfield, chief executive of Infrastructure Capital Advisors. “This is 100% about the chip stocks and the potential slowdown in the AI trade.”
Tim Holland, chief investment officer at Orion, told CNBC that investors are “stepping away until they get a better sense of the implications of the midterms around the AI capex cycle in particular, which is the biggest economic tailwind we’ve had going for us for the last, call it, three years.”
Beyond the AI trade, eToro market analyst Jakub Rochlitz noted that the blue sweep could have upsides, including the possibility that President Donald Trump would be less willing to escalate the war with Iran, which sent Brent crude down as much as 20% this week. “Cheaper energy could ease pressure on inflation, shifting interest rate expectations, which is broadly bullish for equities,” Rochlitz said. “This could be a positive for rate-sensitive sectors such as housing, REITs and utilities.”
Selling spreads beyond tech
Large-cap tech also retreated. Meta Platforms fell 3.8%, Amazon 1.7% and Alphabet 1%. Caterpillar lost 5%, and JPMorgan and Boeing each dropped 4%. Declining issues outnumbered advancers by more than 5-to-1 on the Nasdaq, where 430 stocks hit new 52-week lows.
Investors sought safety in Treasurys, pushing the 10-year yield to its lowest level since Sept. 9. Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin hinted Thursday at further rate increases, and traders are expecting a December hike after September's move. October nonfarm payrolls, due Friday, are the next test for Fed watchers.
For advisors, the volatility underscores the importance of staying disciplined. As clients are urged to hold course, the bearish sentiment reading of 42% reflects the jitters. Meanwhile, an ECB study warned of sharp correction risk in AI-driven rallies, and RIA deal multiples face correction as arbitrage fades.
