Wall Street’s postelection rally lasted all of one session before investors started to digest the real implications of the vote for the four-year old bull market in stocks.
The Nasdaq Composite fell 5.4% in afternoon trading Thursday and slid into correction territory, plummeting more than 10% below its Oct. 6 record close. Investors dumped chip and data-center stocks on bets that Democrats’ midterm sweep, which included wins in key data-center states, will slow the artificial-intelligence buildout. The narrower Nasdaq-100 had already confirmed a correction on Monday.
The S&P 500 dropped 4%, on track for its worst session since the April 2025 “Liberation Day” 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 S&P 500 sector was lower.
After Democrats won both chambers of Congress and several key governor’s races, investors are now pricing in tougher scrutiny of the power-hungry data centers behind the AI trade. Sen. Bernie Sanders of Vermont, who caucuses with Democrats, has called for a national data-center moratorium.
“Investors appear to be recognizing that some newly elected members of Congress and governors are looking to slow the pace of AI infrastructure development,” Melissa Brown, global head of investment decision research at SimCorp, told Reuters. “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 in the lead-up to Tuesday's voting – 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,” Jay Hatfield, chief executive of Infrastructure Capital Advisors, told the Wall Street Journal. “This is 100% about the chip stocks and the potential slowdown in the AI trade.”
Speaking to CNBC, Tim Holland, chief investment officer at Orion, said 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.”
“All the big name tech stocks took a haircut today and were taken down a notch,” said a financial advisor who spoke privately to InvestmentNews about the market drop. “Technology is the biggest part of the S&P 500. It’s repricing right now, but it is too early to tell if this is in any way permanent.”
Beyond the AI trade, etoro Market Analyst Jakub Rochlitz said the blue sweep has potential upsides, including the possibility President Donald Trump would be less willing to escalate the war with Iran, which sent Brent 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, which have seen their stock prices rise over the past weeks."
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%.
“The rubber band is becoming increasingly stretched,” Keith Lerner, chief investment officer at Truist Wealth, told CNBC.
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.
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