Wall Street experienced a significant downturn on Thursday, with the Nasdaq Composite index on the verge of a technical correction. The selloff was primarily driven by a broad retreat in technology stocks, which saw chipmakers and major AI-exposed firms suffer steep losses. This decline arrived just one day after the markets had rallied in response to the conclusion of the US midterm elections.
The Nasdaq Composite moved toward a 10% drop from its record-high close on October 6, a threshold that defines a technical correction. The Nasdaq-100 index, which had already confirmed such a correction on Monday, faced a potential loss of over $2.2 trillion in market value if the downward trend persisted. Market sentiment shifted abruptly after the Democratic Party’s sweeping election victories, which some investors fear will lead to tighter federal regulation on artificial intelligence and a deceleration in data center expansion.
Melissa Brown, the global head of investment decision research at SimCorp, noted that market participants are reacting to the possibility that newly elected members of Congress and state governors may actively seek to slow the pace of AI infrastructure development. While industry experts suggest a total halt to such projects remains unlikely, any significant slowdown poses risks to the broader AI growth narrative, which has relied heavily on the rapid buildout of supporting physical infrastructure throughout the year.
Individual stock performances reflected this widespread investor apprehension. Nvidia shares dropped by 6.4%, and the Philadelphia Semiconductor Index plunged nearly 11%. Large-cap technology companies also faced selling pressure, with Meta Platforms sliding 5.7%, while Amazon and Alphabet fell by 4.3% and 3%, respectively. Furthermore, companies with direct exposure to data center operations, such as IREN, Applied Digital, and Nebius Group, saw sharp declines, as did energy suppliers like GE Vernova and Constellation Energy.
Tesla and SpaceX, led by Elon Musk, both recorded losses exceeding 10%. Qualcomm also saw its stock value slide by 13.5% after the company failed to meet Wall Street’s revenue estimates for fourth-quarter smartphone chip sales. By mid-morning on Thursday, the Dow Jones Industrial Average had fallen by 1,146 points, or 2.15%, while the S&P 500 lost 3.20% and the Nasdaq Composite saw a decline of 4.95%.
Market analysts are now scrutinizing the potential impact of a divided government on future fiscal policy. Some observers suggest that a split in Washington could lead to fewer major legislative changes, potentially complicating efforts to agree on fiscal spending given the existing pressures on the US financial landscape. These concerns were exacerbated by comments from Federal Reserve officials, including Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin, who indicated that future interest rate hikes remain a possibility due to persistent inflation.
Looking ahead, market focus has shifted toward the US non-farm payrolls data scheduled for release on Friday. Traders remain attentive to the Federal Reserve’s future monetary policy decisions, particularly as the central bank has previously signaled potential rate adjustments. As of Thursday, decliners continued to significantly outnumber advancers on both the New York Stock Exchange and the Nasdaq, signaling a period of broad-based caution across the financial markets as investors digest both the political outcomes and the macroeconomic data updates.
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