Two days after the midterm elections sent politicians who were skeptical of artificial intelligence to the center of power, Wall Street met its reckoning.
Shortly after the opening bell rang on Thursday, the sale began.
AI-related stocks in American stocks were massively sold. The NASDAQ Composite Index fell 5.5%, the S&P 500 Index fell 4.4%, and the Dow Index fell more than 1,800 points, all three major indices recording the largest one-day decline since April 2025. The Philadelphia Semiconductor Index fell 12%, making it the worst performance since March 2020. Nvidia fell 9.26%, this year‘s gains all returning, and Micron and AMD each fell 17%.
According to Bloomberg statistics, the NASDAQ 100 index of technology stocks fell more than 6%, the largest one-day decline since the COVID-19 shock in March 2020. The index lost $2.3 trillion in market value that day, falling nearly 15% from its historic high on October 6.
Elections Disrupt Profit Expectations
Just a few weeks ago, AI stocks were driving U.S. stocks to consecutive new highs. The election changed all that.
In the midterm elections on Tuesday, the Democrats won a landslide in the congressional election, winning the governorship of the regions with the most data center planning, such as Texas and Ohio. A total of 41 local bills restricting data center construction were put to the vote in 10 states, with only one not receiving electoral support. Texas‘s elected governor, Inokhosa, has called for further suspension of approval for new projects.
O‘Rourke, chief market strategist at JonesTrading, said semiconductors and memory stocks were the main sources of S&P 500 earnings growth. Policy could change direction, and next year‘s earnings forecasts “will no longer be reliable”, and the low price-earnings ratios calculated based on these forecasts will no longer hold.
Matt Rowe, a senior portfolio manager at Man Group, said that if a project is expected to start generating revenue in 6 to 12 months and is delayed for two to three years, investors will face a series of problems. Melchiore, chief investment officer at Forza Investment Group, predicted that “some projects will stagnate.”
Thursday‘s Crash
The election results were revealed on Wednesday, and the stock market actually went up that day. Trump admitted that the Iran war had hampered the Republican election, causing oil prices to fall sharply. Investors expected inflation to fall back, and hoped that Washington, which is divided between two parties, could counterbalance Trump.
Oil prices partially rebounded on Thursday, with market attention returning to the possibility that data center construction may slow down, trapping buyers who entered the market at the bottom on Wednesday.
O‘Rourke said these people “started too early.”
Technology giants such as Microsoft, Amazon, and Alphabet fell only 2 to 4 percent that day. Chip companies and data center contractors fell much more. Bloomberg pointed out that chip companies benefited from spending on AI devices and were highly valued. Once construction slowed, they would suffer the greatest impact.
The giant‘s own finances were also under pressure: Meta‘s free cash flow turned negative in the last quarter, meaning that the cash generated by operations was no longer enough to pay for capital expenditures, while Amazon and Alphabet had turned negative the previous quarter. Chip manufacturers were also affected by global memory shortages. Intel‘s data center revenues increased by 78%, but due to memory shortages, it provided weak performance guidance, and stock prices plummeted.
OnePoint BFG chief investment officer Bouqueval said that the technology itself will continue to develop, and the stock price trading is whether infrastructure construction will slow down.
Why Selling Grows Bigger
After the market opened, option traders were eager to replenish their positions, and systematic hedge funds followed suit and sold out. Monahan, a partner in the Founder ETFs, said that large long-term funds stopped buying, and multi-strategic hedge funds were clearing all their positions again. No one in the market was willing to take the trade.
A three-fold leveraged ETF with a majority of conductors fell 39% that day. The Panic Index VIX closed at 28.18, its highest since March; its spot-to-three-month futures spread to its largest since April 2025, Bloomberg noted. Such signals often precede deeper declines.
Is it a bubble bursting or a buying opportunity?
Taylor, chief investment officer of PenderFund, said that the current market situation reminded him of 2001 and 2008. The market has placed too much weight on the topic of AI, and adjustments will come sooner or later. Claude, portfolio manager of Hurley Henderson, believes that the election will trigger a round of subconscious reactions that may lead to delays in some projects, and these questions will not have answers in the short term. Green, chief investment officer of G Squared Private Wealth, is optimistic about memory stocks, thinking that as long as the economy is not in a recession, buying during a big downturn is usually worthwhile.
On Thursday night, the Nasdaq 100 index futures fell another 1.3%. The October non-farm employment report in the United States will be released at 9:30 p.m. Beijing time tonight.
“Sometimes markets fall because people are selling,” said Bell, head of market strategy at RBC BlueBay Asset Management. “Sometimes people are selling because markets are falling.”