NEW YORK, NY — Global markets fell hard Thursday after a Wall Street rout erased about $2.5 trillion in market value, with investors suddenly questioning how fast the artificial intelligence boom will keep expanding.
The pullback came one day after a sharp post-midterm rally, making the reversal even more dramatic. The Nasdaq sank 5.52% and ended the session in correction territory, trading more than 10% below its Oct. 6 record. The Dow fell 1,833 points, giving back all of Wednesday’s gains.
Broader markets weakened too, and the selling pressure spread far beyond a single corner of the market. By the close, traders were confronting a much darker outlook for tech-heavy indexes and the companies tied to the AI buildout.
Semiconductor and AI infrastructure shares took the heaviest hit
The losses were especially severe among chipmakers and companies tied to data center construction. Those names had already been under pressure beneath the surface on Wednesday, but the selling intensified on Thursday and dragged the major indexes lower.
Nvidia fell 9.3%, wiping out its gains for the year. A closely watched index of chipmakers dropped 12.3%, its worst day in roughly six and a half years. The Nasdaq 100 lost 6.36%, its steepest decline since March 2020, when the early Covid-19 shock rattled markets.
Shares of CoreWeave and Nebius also slumped sharply. The two neocloud companies, which rent out computing power for AI workloads, fell roughly 10% and 15% respectively as investors reassessed the trade.
Texas politics and data center plans are at the center of the market reaction
One major factor rattling investors is the Texas governor’s race and its possible impact on the state’s role as an AI hub. Texas has become a key location for major data center investment, with Google, Meta, Oracle and OpenAI all making large commitments there.
Governor-elect Gina Hinojosa campaigned on a temporary moratorium on data centers and on eliminating certain tax incentives for companies building them in the state. That raised concerns on Wall Street about whether future AI infrastructure growth could face new limits.
Investors are now trying to decide whether any slowdown in Texas would create buying opportunities elsewhere or signal a broader problem for the pace of AI expansion. The sudden mood shift helped fuel Thursday’s broad market retreat.
Fear spread beyond tech as volatility jumped and bonds rallied
The sell-off was not limited to a handful of AI names. All 11 sectors in the S&P 500 finished lower, showing how quickly the pressure spread across the market.
Wall Street’s fear gauge, the VIX, surged about 70%, its biggest one-day jump in nearly two years and its highest reading in seven months. At the same time, investors moved into government bonds, pushing the 10-year Treasury yield down to 4.84%, its lowest level in two months.
Qualcomm added to the negative tone after missing earnings estimates and warning that higher memory chip costs are hurting sales. Its shares dropped 9.5% Thursday, following a similar warning from Intel last week.
Wednesday’s rally disappeared as markets reset their outlook
The week’s swings were especially violent because they followed a historic move higher on Wednesday. The Dow had surged 1,569 points after the midterm election results, while the Nasdaq gained 1.44%.
By Thursday, that optimism had vanished. The Dow’s 1,833-point drop erased the prior day’s advance in full and left traders digesting how quickly sentiment had shifted around technology and AI spending.
Keith Lerner, chief investment officer at Truist Advisory Services, said the moves looked more like a knee-jerk response than a clean read on how tech will perform under Democratic control of Congress. Even so, the abrupt shift underscored how fragile the trade had become.
Analysts see both risk and opportunity after the AI trade tumbles
Some market watchers think the pullback could eventually make tech more attractive. Ed Yardeni, president of Yardeni Research, said he views a slowdown in AI spending as a healthy correction rather than a disaster.
“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.”
Lerner said the risk-reward profile is improving for longer-term investors as the sector underperforms the broader market. He argued that, at some point, the sell-off could start to look like a buying opportunity.
The volatility may not be over. Tech has already lurched between corrections and record highs several times this year, and investors are watching upcoming public offerings from Anthropic and OpenAI’s expected IPO next year for new clues about the sector’s direction.
Nasdaq, S&P 500 and Dow are all well off recent peaks
The latest losses leave the major averages notably below their recent highs. The Nasdaq is down about 12% from its Oct. 6 peak, while the S&P 500 has fallen roughly 6% since that same date.
The Dow is down about 5% from its Aug. 5 high. That makes Thursday’s rout more than a one-day shock; it also confirms that the market has entered a more cautious phase after months of tech-driven gains.
For now, the central question on Wall Street is whether the AI buildout is merely cooling or whether investors are finally pricing in a more lasting slowdown. Thursday’s trading suggests the market is no longer willing to assume the boom can continue unchecked.