Massive tech sell-off wipes $2.5T from the stock market

NEW YORK CITY — A punishing sell-off rippled through Wall Street on Thursday, wiping out roughly $2.5 trillion in market value from the Nasdaq Composite on fears that Democrats' midterm gains could put the brakes on the AI buildout.

The Nasdaq slumped 5.52% and closed in correction, trading down more than 10% from its record high on October 6.

The tech-heavy index suffered its worst day since April 2025, when President Donald Trump unveiled sweeping global tariffs. Thursday's sell-off extended to broader indexes, with the S&P 500 and the Dow both posting their worst day since April 2025.

It's a sharp reversal from Wednesday's historic post-midterm rally, when the Dow soared 1,569 points and the Nasdaq rose 1.44%. By Thursday, the Dow closed 1,833 points lower, wiping out all of those gains.

While the major indexes rose Wednesday, underneath the surface, shares of semiconductor chipmakers and companies involved in the AI data center buildout were falling. That selling pressure intensified on Thursday, dragging the indexes down sharply.

Key to the sell-off is Texas' gubernatorial Democratic victory, given the state has played a crucial role in accelerating AI advancements, with the likes of Google, Meta, Oracle and OpenAI making massive investments in data centers there. Texas Governor-elect Gina Hinojosa campaigned on a temporary data center moratorium and eliminating certain tax incentives for businesses building data centers in the state.

Shares of chipmakers and the "picks and shovels" of the data center buildout and AI boom are selling off as investors mull the implications of Democrats winning races in states like Texas that are hubs for planned data centers.

Nvidia shares (NVDA) sank 9.3% Thursday, erasing their gains for this year. A closely watched index of chipmakers dropped 12.3% and had its worst day in roughly six-and-a-half years. Shares of Elon Musk's Tesla (TSLA) and SpaceX (SPCX) dropped 11% and 9%, respectively.

The Nasdaq 100, a smaller index that includes major tech companies, sank 6.36%, suffering its worst day since March 2020, when the onset of the Covid-19 pandemic roiled markets.

Shares of CoreWeave (CRWV) and Nebius (NBIS), two neoclouds that rent out compute power for the AI boom, plunged roughly 10% and 15%, respectively. CoreWeave shares are down 76% since a peak in June 2025, shortly after the company went public. Nebius shares are down 58% since a peak in June this year.

Investors are also punishing companies that miss earnings or forecasts. Qualcomm missed estimates on Wednesday and said higher memory chip costs are hurting sales, similar to Intel's guidance last week. Qualcomm shares dropped 9.5% Thursday.

Wall Street's fear gauge, the VIX, which measures expectations for volatility, surged roughly 70% — its biggest one-day surge in almost two years — and hit its highest level in seven months. The sell-off was widespread, with all 11 sectors in the S&P 500 closing lower.

Nerves about AI stocks and bets on a slower data center buildout bolstered government bonds. The 10-year Treasury yield fell to 4.84%, its lowest level in two months.

Keith Lerner, chief investment officer at Truist Advisory Services, saw this week's volatile moves as more of a knee-jerk reaction than a real indication of how stocks, particularly tech, could fare under Democratic control of Congress.

Investors have largely struggled to make sense of whether reining in the AI buildout could create unique investment opportunities or lead to more problems.

On Wednesday, shares of Amazon, Meta and Google — often referred to as hyperscalers in the AI buildout — surged on momentum that the rollout of new restrictions would help free up cash that would otherwise go toward investing in data centers, and thereby increase profitability. By Thursday, however, investors soured on those trades, likely fearing that new restrictions would be a net negative.

While data centers are increasingly essential to powering everything from AI to the broader internet, the breakneck pace of construction has raised questions about whether companies are overbuilding — potentially committing to more computing capacity than demand will ultimately justify.

Ed Yardeni, president of Yardeni Research, sees a potential silver lining from the pullback in the AI trade and obstacles to building data centers.

"We want a slowdown in the AI buildout. It was too frenzied and speculative," Yardeni told CNN. "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."

At the same time, the tech sell-off represents a rare opportunity where the sector is by far underperforming the S&P 500. At a certain point, this kind of bargain could start to look increasingly attractive to investors and cause them to swoop up shares, said Truist's Lerner.

"In our view, the risk-reward is improving for longer-term investors," he said.

Tech overall has been on a rollercoaster this year and is likely to continue with Anthropic's upcoming IPO and OpenAI's expected IPO next year.

The Nasdaq, which skews heavily toward tech companies, closed in correction in March, rallied back to record highs in early June, stumbled and nearly fell into correction in late July, then reclaimed record highs in September and October — before sliding into correction territory again on Thursday.

All told, the Nasdaq and S&P 500 are down roughly 12% and 6%, respectively, since their peaks on October 6. The Dow is down roughly 5% since its peak on August 5.

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