• Analysis
Nasdaq Suffers Worst Day in 18 Months as AI Sell-Off Sweeps Wall Street
The Nasdaq plunged 5.5% on Thursday, its worst day in 18 months, as investors bet the midterm results will bring tougher scrutiny of AI datacentre expansion. The index fell more than 10% below its recent record high, wiping over $2tn off its value.
Correction territory and a $2tn wipeout
The 5.5% slump pushed the Nasdaq into correction territory, more than 10% below its recent record high, with more than $2tn shaved off its value by the end of Thursday trading. It was the index's biggest one-day fall since Donald Trump announced his "liberation day" tariffs on US trading partners in April 2025.
Datacentre fears grip chip stocks
The trigger lay in this week's midterm results. Analysts pointed to expectations that Democratic governors will clamp down on the rollout of new datacentres after the party won several gubernatorial races, while US voters also rejected datacentres in local ballots. Investors anticipated tougher scrutiny of datacentre expansion plans, and worries over massive AI spending spread from New York to markets worldwide.
Chip stocks led the tumble:
- •SanDisk, a memory maker, fell 22%
- •Western Digital, a hard drive maker, fell 17%
Wall Street and global markets join the slide
The Dow Jones industrial average closed down more than 1,800 points, a fall of 3.4%, at 51,868 points, while the S&P 500 dropped 4.3%. Nvidia was the top faller on the Dow, down 9.2%, followed by Goldman Sachs, which fell 3.7%. The VIX fear index jumped by 61% to its highest levels since the early weeks of the Iran war. In London, the FTSE 100 closed down 46 points, or 0.4%, at 10,782.66 after an early European rally faded.
Analysts weigh the unwind
Neil Wilson of Saxo UK said a "complete capitulation-level event" was playing out in tech stocks.
The fear is a total momentum unwind as Democrats pace the frontier and kibosh datacentre buildout.
Tech analyst Dan Ives warned the midterms signal the pace of datacentre buildout will slow. There was, he said, no way to sugarcoat that Democrats taking control, especially over the Senate, "will create some major hurdles for AI and tech legislation in the Beltway over the next two years."
Ted Parkhill, founder and CEO of Incline Investment Management, said: "The market's moving from the promise of AI to the price of AI." He added that AI would be transformative long term but not every AI-related stock is currently priced appropriately, saying "There's going to be a lot of turmoil."
Donald Trump, for his part, took to Truth Social to point to the market's record highs, telling investors: "Your 401(k)s are through the roof. Record Setting All!"
The sell-off also reversed Wednesday's rally, when Wall Street had recorded its biggest daily gain in months as investors anticipated that the Democratic party's success could restrain the White House. With Thursday's close, the Nasdaq remains in correction territory, more than 10% below its recent record high, and worries over AI spending have spread to markets worldwide.
