Reuters : Tech-led Nasdaq notched its deepest one-day drop since ‘Liberation Day’ in April 2025, wiping out trillions in market value on fears of more AI scrutiny, particularly on data center construction, after Democrats won big in US midterm elections.
The Nasdaq Composite fell 5.5% on investor fears that the Democratic Party’s sweeping midterm victory could stall AI infrastructure expansion and force a reckoning for smaller firms whose capacity to raise funds has already been limited by higher interest rates and tighter financial conditions.
It was the second straight day of selling in AI stocks and the fifth decline of more than 500 points in the Nasdaq Composite (.IXIC), opens new tab since mid-October, as the previously buoyant AI trade has come under increasing scrutiny in the last several weeks.
“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,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
The Nasdaq Composite is now in correction territory, having lost nearly 12% from its record close on October 6. A correction is defined as a 10% drop from a recent peak.Many analysts said the scale of the declines suggests further selling is at hand, likely starting with Friday’s market sessions in Asia. Japan’s Nikkei (.N225), opens new tab and South Korea’s Kospi (.KS11), opens new tab have risen more than 20% this year, but they fell significantly following Wednesday’s rout in data center shares.
Some analysts wondered if the scale of the wipeout could affect the timing of Anthropic’s blockbuster IPO expected this fall, as any delay could amplify market sentiment.
Analysts and portfolio managers said declines in once-hot areas such as semiconductors and AI infrastructure weren’t entirely surprising, given the scale of earlier gains in many stocks and the financing concerns that have shadowed neocloud firms such as Nebius (NBIS.O), opens new tab and CoreWeave (CRWV.O), opens new tab since US interest rates climbed late in the summer.Chip and neocloud shares posted the most significant declines on Thursday, reflecting worries that data center buildouts worth billions of dollars could face delays.
The Philadelphia SE Semiconductor index (.SOX), opens new tab fell 12% to touch its lowest level in more than six months. Nvidia (NVDA.O), opens new tab dropped 9% and Advanced Micro (AMD.O), opens new tab slumped 17%.
Wall Street’s fear gauge, the VIX index of expected price swings, posted its largest increase since December 2024.
