Wall Street's monthslong rally in artificial-intelligence stocks hit its roughest patch in years on Thursday, as a broad selloff in chipmakers and data-center operators dragged the Nasdaq Composite into its first correction since April and erased, in a single session, the sharp gains investors had logged a day earlier.
The Nasdaq fell 5.52% to close at 24,315.00, more than 10% below the record it set last month, officially putting the index into correction territory. The Dow Jones Industrial Average shed 1,833.06 points, or 3.44%, to 51,523.06, giving back nearly all of the roughly 1,600-point surge it posted on Wednesday. The S&P 500 dropped 4.36% to 7,353.73, and the small-cap Russell 2000 slid 4.45% into its own correction. All three major benchmarks posted their worst single-day performance since April 2025, according to CNBC's market tracker.
Chipmakers lead the rout
The damage was concentrated, but severe, in the stocks that have carried the market's AI-driven gains for the past three years. The PHLX Semiconductor Index tumbled 12% — its worst day since March 2020 — as Broadcom fell about 10%, Nvidia roughly 9% and Qualcomm about 9% after a weak sales outlook. So-called neocloud operators, the smaller firms that lease AI computing capacity to larger tech companies, were hit even harder: Nebius dropped about 15%, Iren nearly 17% and CoreWeave close to 10%. The selling spread well beyond tech, with Caterpillar down 6% and JPMorgan down 4%, and the seven largest technology companies shed close to $900 billion in combined market value, per Yahoo Finance's live markets coverage.
Midterms reopen the AI-spending debate
The trigger, traders and strategists said, was Tuesday's midterm elections, in which Democrats swept both chambers of Congress and won a string of governorships. Investors are now pricing in the possibility of tighter federal oversight of the data-center buildout that has underpinned AI stock valuations, after Sen. Bernie Sanders renewed his call for a national moratorium on new data centers.
"Investors are stepping away until they get a better sense of the implications of the midterms around the AI capex cycle," said Tim Holland, chief investment officer at Orion. Keith Lerner, co-chief investment officer at Truist, put it more bluntly.
The rubber band is becoming increasingly stretched.
Keith Lerner, Truist
The Macro Research Board went further, telling clients the "shakeout in A.I.-related stocks has much further to run."
The selling also showed up away from equities. The Cboe Volatility Index, Wall Street's main fear gauge, jumped to 28.09, its highest level since March 31. The Nasdaq closed below its 200-day moving average for the first time since April, and the S&P 500 approached its own. Gold and silver, by contrast, rallied toward their best weeks in months as investors sought safer ground, and traders pared bets on a Federal Reserve rate cut next month — odds of a December move fell to roughly 70%, from 83% a day earlier.
Retail investors, who had been steady buyers through most of this year's rally, turned sharply the other way: net sales of individual stocks hit about $358 million, their largest one-day pullback since 2020. "A total capitulation," is how Viraj Patel of Vanda Research described it. Charlie McElligott of Nomura offered a blunter read on the hedge-fund selling that compounded the move, saying funds were "shooting the generals" — locking in 2026 gains in their biggest winners before year-end.
Not every voice was bearish. AMD chief executive Lisa Su, whose stock fell about 15% on the day, said the market "can sometimes be a little bit short-sighted," and added she does not expect AI chip demand to slow anytime soon. Elsewhere, the selloff carried knock-on effects for pending deals: analyst Dan Ives of Yorkville said a prospective SpaceX-Tesla merger now faces a tougher regulatory path and is unlikely to close before 2027, while Stifel's Brian Gardner said the Clarity Act, a crypto-market-structure bill some investors had been watching, is unlikely to advance before year-end.
Markets face their next major test at the Fed's December 9 policy meeting, with Friday's jobs report — October layoffs are tracking at their lowest since 2023 — offering the nearer-term catalyst. Strategists said they expect more rotation and volatility beneath the surface of the indexes in the coming weeks, rather than a quick snapback, with the market's direction likely to hinge on how Washington's new political balance shapes the pace of AI capital spending.
