The Nasdaq Composite plunged by as much as 5.7% on Thursday, sliding into correction territory as investors dumped chip and data-centre shares on fears that the Democrats’ sweeping midterm victories will slow the vast buildout of artificial intelligence infrastructure.
The tech-heavy index traded more than 10% below its record high of 6 October, putting it on course for its worst day since April 2025, when President Donald Trump’s “Liberation Day” tariffs rattled markets. The Nasdaq 100 fell more than 6%, the S&P 500 lost around 3-4%, and the Dow dropped more than 1,000 points at its session low. The sell-off was a sharp reversal of Wednesday’s post-midterm rally, when the Nasdaq had gained 1.44%.
At the centre of the rout was Texas, where Democrat Gina Hinojosa defeated Republican incumbent Greg Abbott in the governor’s race. Texas has become a hub for the AI buildout, hosting 335 data centres with another 247 in planning, and drawing massive investment from Google, Meta, Oracle and OpenAI. Hinojosa campaigned on a temporary moratorium on new data centres and on scrapping tax incentives for companies building them.
Investors fear the Democratic sweep — control of both chambers of Congress as well as key governorships — could mean tighter rules on data-centre construction, energy use and environmental standards, weakening demand for the chips that power them. Of 41 data-centre-related ballot measures voted on this week, all but one went against server farms, according to Ballotpedia.
Chipmakers bore the brunt. Nvidia sank around 7-9%, erasing its gains for the year, while Advanced Micro Devices plunged roughly 15% and Micron fell sharply. The PHLX Semiconductor Index dropped about 10%, and Qualcomm tumbled 11.5% — set for its worst day since March 2020 — after missing estimates and warning that higher memory costs were hurting sales. Tesla fell around 11% and SpaceX about 9%, while neocloud firms CoreWeave and Nebius dropped roughly 11% and 15% respectively. Wall Street’s fear gauge, the VIX, surged 50% to its highest level in seven months.
The sell-off also reflects a broader reassessment of the AI boom itself. The breakneck pace of data-centre construction has raised questions about whether companies are overbuilding — committing to more computing capacity than demand will ultimately justify — and whether the enormous spending commitments can generate returns quickly enough to justify stretched valuations.
Some analysts urged calm. Keith Lerner of Truist Advisory Services called the week’s volatile moves more of a knee-jerk reaction than a reliable guide to how tech will fare under Democratic control of Congress, adding that “the risk-reward is improving for longer-term investors”. Ed Yardeni of Yardeni Research saw a silver lining, telling CNN: “We want a slowdown in the AI buildout. It was too frenzied and speculative. Now we are letting air come out of the AI bubble. It’s better to let air come out of the AI bubble than let it burst.”
Thursday’s slide was the Nasdaq’s second correction this year. The index closed in correction in March, rallied back to record highs in early June, stumbled again in late July, then reclaimed record highs in September and October — before Thursday’s plunge. All figures are intraday, as of afternoon trading in New York, and the story is still developing.
Sources: CNN, “Stocks plunge as midterm results send AI trade into a tailspin” (5 November 2026) — https://www.cnn.com/2026/11/05/investing/tech-heavy-nasdaq-plunges ; Reuters Breakingviews, “Tech wreckage now hinges on Anthropic IPO” (5 November 2026) — https://www.reuters.com/commentary/breakingviews/tech-wreckage-now-hinges-anthropic-ipo-2026-11-05/ ; Reuters Breakingviews, “Global muscle will sift puny data center providers” (5 November 2026) — https://www.reuters.com/commentary/breakingviews/global-muscle-will-sift-puny-data-center-providers-2026-11-05/
