The Nasdaq composite suffered its steepest one-day decline in 18 months on Thursday, falling 5.5% as AI datacenter fears swept through Wall Street following Democratic victories in the midterm elections. The tech-heavy index closed more than 10% below its recent peak, entering correction territory, with over $2tn wiped from its market value by the closing bell.
Chipmakers Lead the Retreat
The selloff was most severe among semiconductor and hardware stocks. Memory producer SanDisk dropped 22%, while hard drive manufacturer Western Digital lost 17%. Nvidia, the chipmaker closely tied to the AI boom, posted the largest decline among Dow Jones industrial average components, falling 9.2%.
The broader market also took heavy losses. The Dow Jones industrial average fell more than 1,800 points, or 3.4%, to close at 51,868. The S&P 500 declined 4.3%. Wall Street’s volatility gauge, the VIX, jumped 61% to its highest level since the early weeks of the Iran war.
Midterm Results Reshape AI Outlook
Investors reacted to expectations that Democratic governors elected this week will impose stricter limits on new datacenter construction. Voters in several localities also rejected datacenter proposals in local ballots across the country. The results marked a sharp reversal from Wednesday, when stocks rallied on hopes that Democratic gains could counterbalance the White House.
Tech analyst Dan Ives warned that Democratic control, particularly of the Senate, will create significant obstacles for AI and tech legislation in Washington over the next two years. Saxo UK investor strategist Neil Wilson described the session as a “complete capitulation-level event” in tech stocks, pointing to fears of a momentum unwind as Democrats potentially slow datacenter expansion. He suggested the reaction appeared overdone but noted that in a “sell everything” market, stability must be found first.
Global Markets and Investor Caution
European stocks initially rose but lost ground by late trading, with the FTSE 100 closing down 46 points, or 0.4%, at 10,782.66. The global ripple reflected concerns that massive AI spending could face tougher scrutiny.
Ted Parkhill, founder and CEO of Incline Investment Management, said the market is shifting from the promise of AI to its price. He said AI will be transformative in the long run, but not every AI-related stock is appropriately valued, and considerable turmoil lies ahead.
Political Reaction and Market Reversal
The selloff erased Wednesday’s rally, which had been Wall Street’s biggest daily gain in months. That surge had prompted Donald Trump to boast on Truth Social about record stock market highs during his second term. By Thursday’s close, those gains had been reversed as AI datacenter fears took hold.
The scale of the decline — the largest since Trump’s “liberation day” tariff announcement in April 2025 — underscores how sensitive the market has become to any signal that the AI buildout could slow. With Democrats now holding governorships and Senate control, investors are recalibrating expectations for the industry’s regulatory environment.
