U.S. stocks tumbled Thursday, Nov. 5, wiping out the previous day’s post-midterm rally as investors sold chip and data-center stocks on fears that Democrats’ nationwide sweep will slow the buildout of artificial-intelligence infrastructure. The S&P 500 lost 4 percent and the tech-heavy Nasdaq composite fell more than 5 percent, while the Nasdaq 100 was down more than 6 percent in morning trading.
The slide reversed a sharp rally on Nov. 4, the first full trading day after the vote: the Nasdaq 100 closed up 0.91 percent, the S&P 500 gained 1.58 percent and the Dow rose 3.03 percent, helped by Democratic wins that investors initially read as reducing political uncertainty. By Thursday, the S&P 500 was on pace for its worst day since April 2025, when markets reacted to President Donald Trump’s “Liberation Day” tariffs, and the Nasdaq composite slipped into correction territory, trading more than 10 percent below a record set last month.
Democratic wins put the data-center buildout in play
Investors are betting that Democrats winning both chambers of Congress and key gubernatorial races could decelerate construction 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. In a post on X, Sanders wrote:
Americans don’t want Big Tech oligarchs wrecking the environment, gutting jobs and threatening humanity’s future.
Sen. Bernie Sanders of Vermont, in a post on X
Sen.-elect Sherrod Brown said, I do not work for data centers,
and Gov. Kathy Hochul of New York, who announced a statewide moratorium on new hyperscale data centers on July 14, said in July that as data-center development threatens to hike utility bills and deplete natural resources, it's my responsibility to take action and lead.
Texas Governor-elect Gina Hinojosa, who vowed days before the vote to stop the data center takeover,
said in a September interview with Politico that These things are not mutually exclusive.
Her campaign stated in September: On Day One as governor, I’ll freeze residential electricity rates and make corporations finally pay their fair share.
Governor Greg Abbott on Oct. 21, 2026 directed the Texas Commission on Environmental Quality to halt all permits sought by data centers until the Electric Reliability Council of Texas completes its audit. On Oct. 19, 2026, the TCEQ reported it had paused permits for infrastructure directly supporting data centers and was suspending some existing authorizations; on Oct. 21, 2026, the agency took its STEERS electronic filing system offline, expecting work to be completed in mid-November.
The Texas Public Utility Commission’s new rule, effective Oct. 8, requires $50,000 per megawatt in financial security for new large-load requests. Brad Reynolds of the Texas Comptroller’s Office told the Texas Tribune: We have vastly, vastly more certifications for exemption that have been granted since that last estimate was done… The next estimate will be significantly higher.
Power producers and chip stocks lead the decline
Texas power stocks took a brutal hit in the election trade: Vistra dropped 13.8 percent, NRG 13.5 percent, Talen 8.5 percent and Constellation 6.7 percent. The PHLX Semiconductor Index fell 7.5 percent, and Qualcomm dropped 10 percent after a weaker-than-expected outlook. Data-center landlords had gone the other way on Wednesday, with REITs and hyperscalers rising.
Chip stocks sank across the board: Nvidia slid 7.5% and was the biggest drag on the S&P 500, one day after a 3.2% decline; Advanced Micro Devices plunged 14.6%; CoreWeave dropped 12.1%; and GE Vernova fell 6.1%. The PHLX Semiconductor Index fell 7.5%, its second straight day of losses. Qualcomm’s handset chip sales dropped 26% as higher memory costs pushed phone makers to raise prices, and Micron paused work on a $4.5 billion Taiwan plant after a labor spat.
The Dow Jones Industrial Average shed 1,620 points, or 3%, erasing all of its advance from Wednesday’s rally, while the small-cap Russell 2000 index decreased 4.6% and also entered a correction. The Nasdaq-100 was on pace to erase more than $2 trillion in market value. Elsewhere, Tesla and SpaceX each fell more than 5%, retailer Nike pulled back 3%, while JPMorgan Chase and American Express each gained more than 1% and AppLovin surged around 30%.
Analysts see a pause in the AI capex cycle, not a stop
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,
adding: It’s about tone and tenor from the party that did really well, incredibly well, at the federal level and at the state level.
Jay Hatfield, chief executive of Infrastructure Capital Advisors, told the Wall Street Journal: “This is a true panic,” adding, “This is 100% about the chip stocks and the potential slowdown in the AI trade.” Keith Lerner, chief investment officer at Truist Wealth, said The rubber band is becoming increasingly stretched,
and added, “Unlike yesterday, you’re just seeing that the sell-off in tech, the size of it, is now feeding itself into the broader market.”
Melissa Brown, global head of investment decision research at SimCorp, told Reuters that investors appear to be recognizing that newly elected members of Congress and governors are looking to slow AI infrastructure development, and that any slowdown would raise concerns because the AI growth story has depended on rapid buildout. UBS strategists wrote that Data center pauses will slow the pace of buildout into 2028,
with about 30 percent of the capacity planned for 2028 at risk.
Pension funds carry the exposure
According to the Equable Institute, at least $578 billion in state and local pension assets is held in AI companies, including $65.2 billion at CalPERS, $34.1 billion at New York Common and $13.7 billion at Texas Teachers. A CalPERS board member, Lisa Middleton, asked, At what point do we need to start looking to what the downside could be?
Commodities and rates stabilize after midterm shock
The yield on the 10-year Treasury fell to 4.83% from 4.90% late Wednesday. October nonfarm payrolls, due Friday, are the next test for Fed watchers, with investors monitoring comments from Federal Reserve officials including Richmond Fed President Thomas Barkin ahead of the report.
Earlier coverage: AI Data Center Stocks Lead Market Retreat on Wall Street
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