Tech stocks plunge on midterm fears

Technology stocks suffered heavy losses on Thursday as investors reacted to the shift in congressional power. The Nasdaq Composite Index fell 1,285 points, or 5%, during early afternoon trading. The S&P 500 dropped 300 points, a decline of 3.9%, while the Dow Jones Industrial Average lost 1,586 points, or nearly 3%.

Market analysts attribute the selling to worries that a Democratic-controlled Congress may slow the construction of new data centers. These facilities are essential for powering artificial intelligence services. Adam Crisafulli, a Wall Street analyst at Vital Knowledge, described the move as a reaction to growing headline risks surrounding the AI sector.

Joe Maher, a markets economist at Capital Economics, noted that U.S. equities are tracking for their worst performance since the April 2025 market shock. He observed that the market had rallied on Wednesday after election results reduced uncertainty about Washington. However, visible cracks in the AI ecosystem widened on Thursday as investors focused on the potential impact of new leadership in Congress.

Chris Larkin, a managing director of trading and investing for E*TRADE from Morgan Stanley, explained the shift in investor sentiment via email. He stated that while Wednesday saw a rally, Thursday brought concerns about a slower data center buildout under Democratic control. Market watchers believe the party change could strengthen the position of opponents to data centers and related infrastructure projects that have faced public resistance.

Specific companies in the AI space experienced steep declines. Nvidia shares dropped 7.5%, marking their second consecutive day of losses. Advanced Micro Devices fell 14.6%, and CoreWeave, which rents AI chip access via the cloud, declined 12.1%. Trump Media & Technology Group shares also slid 11%, extending a sharp drop from the previous day to an all-time low since the company's March 2024 debut.

Maher suggested that the midterm results might be the catalyst that ends the AI equity boom, describing the current period as the final innings of the bubble. In other markets, oil prices recovered slightly. Brent crude rose 2.6% to $97.11 per barrel, regaining much of its loss from the prior day. Uncertainty persists regarding the conflict with Iran and the timeline for normalizing global energy flows.