Stocks crater as investors recoil from tech companies

The stock market tanked on Thursday amid concerns that a shift in congressional political control following the U.S. midterm elections could slow the construction of data centers that power artificial intelligence services.

Stocks sank across the board, but technology companies with a hand in the AI sector were hit especially hard. The tech-heavy Nasdaq Composite Index tumbled 1,285 points, or 5%, in early-afternoon trading, a sign investors are reacting to the growing “headline” risks around AI, according to Wall Street analyst Adam Crisafulli of Vital Knowledge.

The broader S&P 500 dropped 300 points, or 3.9%, while the blue-chip Dow Jones Industrial Average plunged 1,586 points, or nearly 3%. U.S. equities are now on track for their worst day since the “Liberation Day” shock in April 2025, when President Trump announced tariffs on countries around the world, noted Joe Maher, a markets economist at investment research firm Capital Economics.

The rout marks a sharp reversal from Wednesday, when the Dow posted its biggest gain of the year. Other indexes also surged after the election results eased uncertainty about who will control Washington.

“Even though the market rallied Wednesday after the midterm elections, there were visible cracks in the AI ecosystem, and they widened on Thursday amid investor concerns about a potentially slower data center buildout with Democrats in charge of Congress,” Chris Larkin, a managing director of trading and investing for E*TRADE from Morgan Stanley, said in an email.

Market watchers think the Democrats’ sweeping electoral victories this week could bolster opponents of data centers and slow the rollout of the facilities, which have spurred widespread public opposition.

A slowdown in erecting data centers could deal a major blow to AI companies, which are pouring billions into the buildout and banking on widespread adoption of the technology.

Pricking the bubble?

Investors worry that the enormous investment in AI is creating a stock market bubble, which happens when sky-high valuations become detached from companies’ underlying fundamentals.

“Whether the midterms shock turns out to be the catalyst that derails the AI equity boom remains to be seen, but it strengthens our sense that the boom is in its final innings,” Maher said.

Chip and other AI-exposed stocks are taking a particular beating. Nvidia shares fell 7.5% and were the heaviest weight on the S&P 500, a day after dropping 3.2%. Advanced Micro Devices tumbled 14.6%. CoreWeave, a company that rents access to AI chips to customers over the cloud, fell 12.1%.