Stocks plunge post-US midterms; AI worries trigger worst day in over a year for S&P 500

The tech-heavy Nasdaq Composite sank as much as 5.7% on Thursday, pushed down by investor concerns that Democratic gains in the midterm elections might curb the rapid expansion of artificial intelligence data centers.

The decline plunged the Nasdaq into correction territory, leaving it over 10% below its October 6 peak and heading toward its sharpest single-day decline since President Donald Trump introduced broad global tariffs in April 2025. The downturn abruptly reversed Wednesday's post-election bounce, which had seen the index gain 1.44%. Broader markets shared in the downturn, with both the S&P 500 and the Dow Jones Industrial Average pacing toward their steepest losses since April 2025.

Although the Nasdaq finished higher on Wednesday, semiconductor firms and data center suppliers had already begun sliding during that session. By Thursday, that localised weakness broadened into a wide-ranging tech sell-off.

A central trigger for the drop was the victory of Democrat Gina Hinojosa in the Texas gubernatorial race. Texas has served as a key destination for AI expansion, drawing major investments from tech giants including Google, Meta, Oracle, and OpenAI. Governor-elect Hinojosa ran on a platform that included temporary halts on new data center projects and the removal of targeted corporate tax breaks for data center developers.

Concerns over potential political shifts in key data center hubs led to sharp losses across semiconductor producers and infrastructure vendors.

• Nvidia (NVDA) dropped 7%, wiping out its year-to-date gains.
• A major semiconductor index slid 10%.
• Tesla (TSLA) and SpaceX (SPCX) fell 11% and 9%, respectively.
• Neocloud compute providers CoreWeave (CRWV) and Nebius (NBIS) plummeted around 11% and 15%.

Market sentiment was further battered by quarterly earnings reports. Qualcomm dropped 11.5%—its largest single-day drop since March 2020—after missing performance projections and warning that rising memory component costs were weighing on results, echoing similar guidance issued by Intel the week prior. Reflecting the market anxiety, the Cboe Volatility Index (VIX) surged 50% to a seven-month high.

Market observers offered differing takes on the turmoil. Keith Lerner, chief investment officer at Truist Advisory Services, characterized the sharp market movements as a short-term knee-jerk reaction rather than a clear signal of how tech equities will perform under Democratic control. Ed Yardeni, president of Yardeni Research, suggested that a pause in aggressive data center construction might offer a silver lining by mitigating risks of overbuilding.

The volatility also mirrored shifting sentiment around major tech firms. On Wednesday, shares of hyperscalers Amazon, Meta, and Alphabet rose on expectations that potential policy restrictions might limit capital expenditure on data centers, thereby boosting cash reserves. By Thursday, however, those gains vanished as investors weighed the broader top-line risks of constrained infrastructure expansion.

The sell-off comes during a turbulent year for technology stocks, driven by debate over whether the rapid pace of data center construction risks generating excess capacity relative to actual market demand. The Nasdaq previously hit correction territory in March, rebounded to record peaks by June, stumbled near correction levels in late July, and touched new highs in September and October before entering its latest correction on Thursday. Volatility is expected to persist as the market prepares for potential public listings from AI developers Anthropic and OpenAI.