Thursday was the day the AI trade stopped being a dip and became a rout. The Nasdaq Composite fell 5.5%, its worst single-day drop since the April 2025 "Liberation Day" selloff, and closed nearly 12% below its October 6 record — putting the index in a technical correction. The Nasdaq 100 fell 6.4%, erasing $2.5 trillion in market value in a single session, according to Reuters.
The trigger was politics, not earnings. Investors spent Thursday reassessing what the Democrats' sweeping midterm victory — both houses of Congress, plus governorships in key data-center states — means for the AI infrastructure buildout. Dozens of ballot initiatives passed Tuesday that stand to limit data-center construction, and UBS estimated around 30% of expected U.S. data-center capacity additions in 2028 could be at risk from construction pauses.
"The big election outcome was, especially with the Democrats winning a lot of the governorships, that the slowdown of the data center buildout is the real key theme that's going to stick," Michael O'Rourke, chief market strategist at JonesTrading, told Reuters.
The damage was concentrated exactly where the boom was hottest. The Philadelphia Semiconductor Index fell 12%, its second-biggest drop on record. Nvidia dropped 9%, AMD slumped 17%, and SanDisk fell 22%. The neoclouds — the debt-fueled rent-a-GPU firms that became the trade's canary — fared worse: CoreWeave fell 10% as its five-year credit default swap spreads widened to a record, and Nebius dropped 15%. Both have lost half or more of their value since the Nasdaq's October 6 peak.
This was not a one-day panic. It was the second straight day of selling in AI stocks and the fifth Nasdaq decline of more than 500 points since mid-October. The S&P 500 fell 4.4%, the Dow 3.4%, and all eleven S&P sectors finished lower.
What changed is the question investors are finally asking out loud: not whether AI works, but what it costs — and who pays. "The market's moving from the promise of AI to the price of AI," Ted Parkhill, founder of Incline Investment Management, told Reuters. "There's no question that AI is going to be transformative for the world in the long run. But that doesn't mean every AI-related stock is currently priced appropriately."
Watch Friday: October jobs data lands, Asian markets get their first crack at the rout, and some analysts are already wondering whether the wipeout delays Anthropic's blockbuster IPO, expected this fall. Thursday suggests the market is still deciding whether the AI buildout is a boom with a pause in it, or a bill that has finally come due.
— via Reuters