The Nasdaq Composite index closed down more than 5.5% on Thursday, marking its worst daily performance since the April 2025 Liberation Day
rout. The drop erased an estimated $2.3 trillion in market capitalization as investors reacted to midterm election results that signaled policy changes for artificial intelligence and data center development.
Midterm Results Spark Tech Sell-Off
Markets had initially rallied on Wednesday following the midterm elections, but sentiment soured as the scale of Democratic victories became clear. The S&P 500 fell 4.36%, while the Dow Jones Industrial Average dropped 1,833.06 points, or 3.44%. Both indexes recorded their largest single-day declines since April 2025.
The obvious catalyst for the sharp selloff is that markets are pricing in the midterm results, after yesterday saw markets rise across the board as the political risk premium unwound,
said Jakub Rochlitz, a market analyst at eToro.
Investors are specifically responding to a wave of Democratic candidates who campaigned on promises to slow the expansion of data centers. In Texas, governor-elect Gina Hinojosa pledged to pursue a moratorium on new construction in the sector. This has prompted concerns that the rapid growth of the AI infrastructure pipeline will face regulatory hurdles.
The market’s interpretation is that the AI infrastructure buildout will become slower and more expensive, which is rewriting growth expectations across the whole supply chain,
Rochlitz added.
Semiconductor Sector Suffers Worst Drop Since March 2020
The semiconductor sector saw the most impact, with the Philadelphia Semiconductor Index plunging more than 12%. This drop represents the index’s worst performance since March 2020.
Other chipmakers and tech companies also experienced sharp declines:
- AMD: Dropped more than 17%
- Micron: Dropped more than 17%
- SanDisk: Plunged more than 22%
- Intel: Dropped 10.3%
- Tesla: Plunged nearly 11%
- SpaceX: Dropped 9.05%
Jed Ellerbroek, a portfolio manager at Argent Capital Management, characterized the movement as a capitulation phase for the data center capex beneficiary stocks, especially the semiconductors,
though he noted that the magnitude of the moves is outsized.
Analysts Debate Market Outlook
While the Nasdaq has entered what market analysts define as correction territory—a decline of at least 10% from its recent high—some observers suggest the reaction may be overstated.
I don’t think this is an AI bubble bursting,
said Ed Yardeni, president of Yardeni Research. I think it’s an AI bubble losing some air very, very rapidly, and I think that reduces the likelihood that we’ll get a bursting bubble that has adverse consequences for the economy and financial system.
Despite the volatility, some industry figures emphasized the need to improve public perception of AI infrastructure. Greg Brockman, president and co-founder of OpenAI, noted during the WSJ conference that everyone had been surprised by the reaction to data centers in the midterms.
Political Figures Respond to Volatility
President Donald Trump addressed the market decline on Thursday, attributing the losses to the election outcomes.
The Stock Market suffered one of the Worst Days in History based on the results of the Election. Such a sad thing to watch!
Trump wrote on Truth Social. Do not fear, however, we will soon, one way or the other, be BIGGER AND STRONGER THAN EVER BEFORE.
Democratic Senator Bernie Sanders expressed a different view on the role of oversight, stating on X, Americans don’t want Big Tech oligarchs wrecking the environment, gutting jobs and threatening humanity’s future. NATIONAL DATA CENTER MORATORIUM NOW.
As market participants adjust their strategies, traders have begun to scale back expectations for Federal Reserve interest rate hikes. Current odds for a rate increase during the December 8–9 meeting have fallen to approximately 60%.
Earlier coverage: Tech Giants Trigger New Stock Market Rout Over AI Costs
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