The Nasdaq Composite fell 5.1 percent on Thursday, confirming a technical correction as investors retreated from artificial intelligence and chip-related stocks. The sell-off erased gains from the previous day’s post-election rally. By midday, the Dow Jones Industrial Average had fallen 1,403.66 points, or 2.63%, to 51,952.46, while the S&P 500 lost 262.17 points, or 3.41%, to 7,426.41 and the Nasdaq Composite lost 1,173.62 points, or 4.55%, to 24,564.36.
Data Center Construction Fears
The market decline followed sweeping Democratic victories in the midterm elections, which investors interpreted as a signal of potential regulatory hurdles for the technology sector. Market participants expressed concern that a new Congress could slow the pace of data center construction, a key driver of recent AI infrastructure investment.
According to Data Centers on the Ballot, 39 ballot measures to restrict AI were successful, while only one — in North Dakota — voted against restrictions.
The sentiment was echoed by Dan Ives, partner and analyst at Yorkville Ives & Co, who noted in a Thursday note that the growth rate for data centers through 2028 will moderate significantly due to the political map, particularly in Texas. OpenAI has attempted to mitigate this backlash by pledging to work with local communities and reduce power usage, with Chief Global Affairs Officer Chris Lehane noting that the company had been in talks with residents and officials in states like Georgia, Ohio, and Texas to develop a National Community Compact.
Tech Indexes Sink as Correction Erases Market Value
Tech-heavy indexes bore the brunt of the selling pressure. The Nasdaq 100 dropped 4.75% to 27,080 after trading as low as 26,968.85. The broader Nasdaq Composite fell 5.3%, pushing the index into correction territory, defined as a decline of at least 10% from its recent record high. The rout erased more than $2.5 trillion in market value.
Chipmakers and companies tied to the data center build-out led the decline. Vertiv fell 13.32%, GE Vernova dropped 6.39%, and Bloom Energy slid 15.13%. Arm Holdings retreated 12.24% despite reporting record revenue, and Micron Technology added to a previous 7% drop with a further 14.86% decline. Other notable moves included SanDisk tumbling 19% and Western Digital falling 16.5%. As Nick Puckrin, a cross-asset analyst, wrote in a note, There's blood on the streets today as AI-linked names tumble.
Volatility Spikes as Market Turbulence Rattles Investors
The CBOE Volatility Index, or VIX, jumped 40% to its highest level since the early weeks of the Iran war.
The S&P 500’s performance on Thursday was on track for its worst day since April 2025, when President Donald Trump’s “Liberation Day” tariffs shook global markets.
Despite the turmoil, some market participants maintained a long-term view. There's no question that AI is going to be transformative for the world in the long run,
said Parkhill, founder and CEO of Incline Investment Management. But that doesn't mean every AI-related stock is currently priced appropriately. There’s going to be a lot of turmoil.
Earlier coverage: Nasdaq Plummets Into Correction Amid Tech Selloff