$3 Trillion Vanishes as Chip Stocks Plunge on AI Fears After One-Day Rally

U.S. stocks shed roughly $3 trillion in market value on Thursday, one day after Wall Street posted its best post-midterm rally in 44 years. The Nasdaq fell about 5% and the S&P 500 nearly 4%, wiping out Wednesday's gains and then some.

By early Thursday afternoon, the Nasdaq had dropped 5.2% and the S&P 500 3.8%. The Dow lost 2.9%, or more than 1,500 points. The S&P 500 fell as low as 7,394.49 — below its Election Day close. The Dow was heading for its worst second trading day after a midterm in data going back to the index's launch in 1896.

Where did the losses land hardest?

AI and semiconductor stocks absorbed the blow. The Philadelphia Semiconductor Index was down about 9.75% in a Reuters intraday snapshot and briefly fell as much as 11%. That put it on track for its steepest daily loss since March 2020.

• AMD: down roughly 15%
• Micron: down roughly 15%
• Nvidia: down almost 9%
• Qualcomm: down 11.2%
• Arm Holdings: down 11%
• Tesla: down as much as 10%

The selling was not confined to the United States. Asian markets sold off overnight. South Korea's Kospi closed down 5.28% with trading halts during the session. Taiwan's main index fell 3.2%. The Nikkei lost 1.79%. Oil prices also rebounded after Wednesday's drop of more than 8%.

What happened on Wednesday?

The contrast with Wednesday was stark. The Dow rose 1,569 points, or 3% — its best performance after a midterm election in 44 years. The S&P 500 gained 1.6% to 7,688.62 as oil fell more than 8%, and investors appeared to bet that divided government would produce steadier policy.

But the midterm risk to AI was already visible in parts of the market on Wednesday, before it hit in full on Thursday.

Are Democratic policies inherently anti-AI?

Perhaps part of the reason for the hit to AI and tech lies in the so-called Blue Tsunami. There were 41 ballot measures regarding slowing down data center buildouts, and most of them passed — especially in Ohio.

Vistra plunged 14% and Vertiv fell 13% on fears of data center moratoriums. Nvidia slipped only 3% on Wednesday. Smaller AI cloud providers such as CoreWeave were also hit hard, since a permitting slowdown in Texas would hurt operators like CoreWeave before it reached the hyperscalers that are their main customers.

Some of the biggest tech companies — the ones that pay for the build-out — saw their stocks rise. Some analysts and economists argued political pushback could let air out of an inevitable AI bubble without popping it.

Why does Texas matter so much?

Texas is the main source of worry about the build-out. Wells Fargo estimates 27% of planned data center gigawatts are in Texas.

Democrat Gina Hinojosa, who wants an immediate moratorium on new data centers, beat Republican Gov. Greg Abbott. Amy Acton in Ohio and Keisha Lance Bottoms in Georgia also campaigned on restricting data center development.

The opposition is not purely partisan. Abbott paused new data center permits in September pending a grid audit, and Hinojosa campaigned on extending that moratorium. Hinojosa likely won't need a new law, since Abbott's pause on grid connections already freezes data center permits.

Who gained on the day?

The losses were concentrated in tech, but four of the S&P 500's 11 sectors finished higher. Consumer staples rose 1.5%. Berkshire Hathaway hit an all-time high.

The market's verdict was sharp: investors repriced the AI infrastructure trade overnight, and the stocks most exposed to data center permitting now carry the political risk that a one-day rally could not price in.