The recent AI stock crash cost your 401(k) roughly five cents on every dollar if you hold a standard S&P 500 index fund. That is the blunt arithmetic behind Thursday’s selloff, which delivered the S&P 500 its steepest one-day decline in more than a year and a half and handed chipmakers their worst session since March 2020.
For a $1,000 position in an S&P 500 index fund at the market’s Oct. 6 high, the value had slipped to about $950. The same amount placed in chip stocks would have shrunk to roughly $710, and in Nvidia alone to about $790. Funds tracking the tech-concentrated Nasdaq fared worse, with losses closer to ten cents on the dollar. The Nasdaq closed Thursday in correction territory, meaning a drop of at least 10% from its record.
Why the average stock didn't follow the index down
One of the more counterintuitive details from the selloff: the typical S&P 500 company was actually slightly higher than it had been at the October peak. The index is weighted by company size, so its largest members carry the most influence. Chipmakers account for roughly 14% of the S&P 500 by Yahoo Finance’s count, which means their collapse dragged the index lower even as hundreds of smaller constituents held steady or gained.
That cushion works in both directions. AI-linked firms represent a substantial share of most index funds and have driven a large portion of the market’s recent gains. A deeper AI slide would therefore hit retirement accounts considerably harder than a simple headcount of companies might suggest.
What is rattling the data center trade
The anxiety centers on the data centers that consume those chips. Democrats won control of Congress this week, and candidates from both parties campaigned against the buildout. Mark Haefele, chief investment officer at UBS Global Wealth Management, attributed the rout in a Thursday note to uncertainty over the cost and pace of data center construction.
Nvidia’s decline was its worst since the DeepSeek scare in January 2025. The broader chip sector had not posted a session this poor since the pandemic’s opening weeks in March 2020. The Dow Jones Industrial Average also recorded its worst second day after a midterm election in records stretching back to 1896.
A historical streak, with a caveat
Investors looking for reassurance can point to a long-running pattern: the S&P 500 has finished higher 12 months after every midterm election since 1950, a 19-for-19 record based on Yahoo Finance calculations. The caveat is that 19 instances is a thin sample, and none of them coincided with an AI boom of the current scale.
Markets were attempting a rebound Friday after a stronger-than-expected jobs report. Employers added 165,000 positions in October, more than double the consensus forecast, and stocks moved higher on the news.
What strategists are telling nervous investors
Steve Sosnick, chief strategist at Interactive Brokers, offered a measured message on Yahoo Finance’s “The 8:30” Friday. He advised against panicking and urged investors to stay level-headed, noting that there are valid arguments on both the sell and buy sides of the current market.
For retirement savers, the practical takeaway is that index funds are not insulated from concentrated sector risk. The same mega-cap chip names that amplified gains on the way up are now amplifying losses on the way down — and the October peak is a useful benchmark for measuring exactly how much.