AI Stocks Shed a Record $2.3 Trillion in a Day as Midterm Results Rattle the Data Center Trade
The Nasdaq 100 fell more than 6% and the Philadelphia Semiconductor Index dropped about 12% as investors bet that a Democratic sweep will slow AI infrastructure construction.
Technology stocks suffered their worst single-day rout since the pandemic on Thursday, wiping out the post-election rally that had briefly made the AI trade look unstoppable.
The Nasdaq 100 fell roughly 6%, erasing a record $2.3 trillion in market value. The Nasdaq Composite dropped 5.5%, entering correction territory — defined as a decline of at least 10% from a recent high. The S&P 500 fell 4.4% and the Dow Jones Industrial Average slipped 3.4%, or more than 1,800 points. The Philadelphia Semiconductor Index dropped about 12%.
What triggered it
The selloff was a direct reaction to Tuesday’s midterm elections. Democrats won decisive majorities in both chambers of Congress and swept governor’s races in states that have become the centre of US data center construction, including Texas, Georgia and Ohio — states that together account for roughly 40% of planned US data center capacity.
In Texas, Governor-elect Gina Hinojosa campaigned on opposition to new data centers and has pledged to extend a statewide moratorium on construction until the state legislature meets in 2027. Data centers became a defining issue in races across the country, driven by voter concerns over electricity costs, water consumption and grid reliability.
UBS analysts estimate that around 30% of expected US data center capacity additions in 2028 could be at risk from potential construction pauses. Dan Ives of Wedbush told Fortune he expects at least 10% of the 800 to 1,000 AI-focused data centers planned in the US to be removed from the roadmap, with up to 20% facing a much longer regulatory process.
Contagion
The losses spread well beyond the US. On Friday, South Korea’s KOSPI opened 8.55% lower and triggered a 20-minute trading halt as Samsung Electronics fell 10% and SK Hynix 11.7%. Japan’s Nikkei fell 6.7%, and Taiwan’s Taiex posted its largest intraday point drop on record.
Credit markets signalled stress. The cost of insuring CoreWeave debt against default surged past 1,000 basis points, a level associated with distressed borrowers, while the price of insurance against default at SoftBank leapt to a four-year high.
The rout also exposed fragility in the AI investment chain. Bloomberg reported that Microsoft is tightening oversight of some data center projects and stepping away from those it considers risky. IREN said more than $4 billion in annual recurring revenue expected to begin in 2026 has slipped to at least January, after Microsoft asked to reconfigure network infrastructure for 200 megawatts of capacity.
Perhaps most tellingly, investors began to doubt the timing of Anthropic’s planned initial public offering. Three major investors told The Wall Street Journal that the company’s $1.5 trillion target valuation would likely have to come down, with one suggesting it could end up closer to $1 trillion.
What happens next
Futures pointed to a partial recovery on Friday, with the Nasdaq 100 rising nearly 2%, but traders remained on edge. JPMorgan analysts wrote that they expect the AI boom to remain on track, but “may become costlier, slower, and more consolidated in the coming years.”
Key points
- Nasdaq 100: -6%, a record $2.3 trillion in market value erased in one session.
- Nasdaq Composite entered correction territory; S&P 500 -4.4%; Dow -3.4%.
- Democratic midterm wins in Texas, Georgia and Ohio raised fears of data center construction delays.
- UBS puts ~30% of expected 2028 US data center capacity additions at risk.
- Anthropic’s $1.5 trillion IPO valuation is now in doubt, according to investors.