A sweeping midterm AI backlash wiped an estimated $2.5tn from the Nasdaq composite on Thursday, as Democratic victories and ballot measures aimed at curbing data centre construction fuelled fears that the artificial intelligence boom could stall.
The tech-heavy index closed down more than 5.5%, according to Dow Jones data, its steepest one-day fall since 2025. The sell-off rippled across Wall Street: the S&P 500 dropped 4.4%, while the Dow Jones Industrial Average gave up Wednesday’s gains to finish 3.4% lower. The Nasdaq’s decline pushed it into correction territory, defined as a drop of at least 10% from a recent high.
Chipmakers and Musk firms hit hardest
Companies most exposed to AI infrastructure bore the brunt of the selling. Nvidia fell more than 9%, erasing over $400bn in market value. AMD and Micron each tumbled more than 17%, Intel lost 10.3% and memory card maker SanDisk plunged more than 22%. The Philadelphia Semiconductor Index, which tracks 30 of the largest semiconductor producers, dropped more than 12%.
Elon Musk’s companies also suffered. SpaceX slid 8% and Tesla fell nearly 11%, together shedding more than $300bn in value on the day. Musk had spent close to $450m backing Republican campaigns, including at least $45m for Ken Paxton’s Texas Senate bid, but Texas swung Democratic on Tuesday night.
Across the so-called magnificent seven tech giants, including Apple, Nvidia and Tesla, a total of $1tn in value disappeared in a single trading session.
Ballot measures and campaign pledges
The market turmoil followed an election in which Democrats campaigned on slowing the spread of data centres and AI. Dozens of measures appeared on ballots around the country seeking to restrict the development of the facilities that underpin the technology. In Texas, governor-elect Gina Hinojosa made opposition to data centres a centrepiece of her campaign, pledging a moratorium on new construction in the sector.
Investors were already uneasy about whether the enormous sums being poured into AI would generate adequate returns. Those doubts collided with the prospect of a sharp slowdown in data centre construction, said Susannah Streeter, chief investment strategist at Wealth Club. She described fresh panic over the AI trade hitting Wall Street hard, with fears about returns now meeting the political reality of construction delays.
Industry acknowledges surprise
Some technology leaders conceded they had not anticipated the strength of the backlash. OpenAI president and co-founder Greg Brockman said at the WSJ Tech conference in Napa, California, on Wednesday evening that the reaction to data centres had caught people off guard. He said the company had shifted its approach over the year, recognising that building infrastructure in states such as Texas and Georgia required genuine engagement with local communities rather than remote messaging from San Francisco.
Meta’s president, Dina Powell McCormick, told the same conference that the industry needed to make a far greater effort to communicate the benefits of AI.
Beyond the election results, some investors worry that AI-related shares may be caught in a bubble overdue for correction, adding further pressure to a sector already sensitive to any sign that the spending surge could slow.
