Artificial intelligence stocks tumble after Democratic midterm sweep raises data-center doubts

Overview

Updated 41 minutes ago

The Nasdaq 100 fell 6.4% on Thursday, and about $3.2 trillion in market value disappeared across Wall Street. The Standard & Poor's 500 fell 4.4%, the Nasdaq Composite dropped 5.5% and the Cboe Volatility Index closed at 28.36, its highest level in eight months.

The immediate trigger was the Democratic Party's midterm sweep. Candidates who pledged to slow or halt AI data-center construction won races from Maine to Alaska, including the Texas governor's race. Investors had rallied the day before, then reversed course when the results looked more likely to slow the buildout that AI companies depend on.

Why it matters

If data-center construction slows, the AI investment cycle that has driven United States stock gains and economic growth loses its main engine.

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Key Indicators

$3.2T

Market value erased

Reported losses across Wall Street in Thursday's selloff.

6.4%

Nasdaq 100 decline

The tech-heavy index had its worst day since April 2025.

4.4%

S&P 500 decline

The broad index erased about $2.8 trillion in value.

28.36

VIX close

An eight-month high for Wall Street's fear gauge.

$47B

Leveraged exchange-traded fund selling

Nomura's estimate of rebalancing sales into the close.

30%

2028 data-center capacity at risk

UBS estimate of expected United States additions threatened by construction pauses.

Voices

Curated perspectives — historical figures and your fellow readers.

People Involved

Steve Sosnick

Chief strategist at Interactive Brokers

Active market strategist

Ed Yardeni

President of Yardeni Research

Active market analyst

Melissa Brown

Global head of investment decision research at SimCorp

Active analyst

Gina Hinojosa

Texas governor-elect

Governor-elect, has not taken office

Organizations Involved

The Nasdaq Stock Market LLC

Stock exchange

Operates the Nasdaq 100 and Nasdaq Composite indexes at the center of the selloff.

Nasdaq runs the two indexes that measured Thursday's AI stock rout.

UBS

Global investment bank

Published estimate on data-center construction risk.

UBS gave investors a concrete estimate of how much AI data-center capacity could be delayed.

Interactive Brokers

Brokerage

Its chief strategist described the rush for protection.

Interactive Brokers is a brokerage that handles heavy retail and professional options trading.

Timeline

6 events Latest: Yesterday

Tap a bar to jump to that date

November 2026
Nasdaq 100 plunges 6.4% in AI selloff
Latest Markets

The tech-heavy index erased about $2.5 trillion in market value; the VIX jumped to 28.36.
Yesterday
Leveraged funds sell about $47 billion into the close
Markets

Nomura estimated rebalancing by leveraged and inverse funds amplified the decline.
Yesterday
Goldman Sachs reports hedge fund losses
Markets

Goldman Sachs told clients its hedge-fund clients were down significantly on AI exposure.
Yesterday
Stocks rally as investors bet on divided government
Markets

The Nasdaq and S&P 500 rose as investors initially brushed aside data-center risk.
2 days ago
Qualcomm and Arm report mixed results after the close
Earnings

The chipmakers' results added to concerns about AI hardware demand.
2 days ago
Democrats win midterm races across the country
Election

Voters elected Democrats, including candidates who pledged to slow or halt AI data-center construction.
3 days ago

Scenarios

Major cloud company cuts 2027 data-center spending

Possible Resolves by Q2 2027

Discussed by: UBS analysts and Yardeni Research

If local permitting resistance turns into delayed projects, a major cloud company could trim its capital spending forecast. UBS estimated about 30% of expected 2028 United States data-center capacity additions could be at risk from construction pauses.

Nasdaq 100 falls into a bear market

Possible Resolves by Jan 31, 2027

Discussed by: Steve Sosnick of Interactive Brokers and other market strategists

If the AI re-evaluation is lasting, the index could extend losses beyond 20% from its peak. The VIX's jump shows investors are buying protection against further weakness.

AI trade recovers to pre-selloff high

Possible Resolves by Q2 2027

Discussed by: Ed Yardeni of Yardeni Research

Yardeni called the move a bubble losing air, not bursting. If earnings hold and political resistance stays local, buyers could return and lift the index back to its prior close.

Congress passes data-center permitting limits

Unlikely Resolves by Nov 5, 2027

Discussed by: NPR and NBC News reporting on candidates' pledges

Hundreds of candidates pledged to rein in data centers. A federal bill could formalize local vetoes or require environmental reviews before new projects proceed.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

March 2000-October 2002

Dot-com bubble burst (2000-2002)

The Nasdaq Composite peaked in March 2000 after a run in internet and telecom stocks. It then fell about 78% by October 2002 as overbuilt fiber networks and weak profits exposed the gap between spending and returns.

Then

Telecom and internet stocks collapsed, and many companies failed.

Now

The buildout left cheap fiber capacity that later supported broadband, but investors lost heavily.

Why this matters now

Today's AI spending boom raises the same question: whether data-center investment will earn returns before political or financial resistance bites.

January-December 2022

2022 growth-stock selloff

The Federal Reserve raised interest rates from near zero to fight inflation. The Nasdaq Composite fell about 33% in 2022 as investors discounted future profits at higher rates.

Then

High-multiple technology stocks fell sharply, and layoffs followed.

Now

AI stocks led the next rally, showing that rate shocks can reset valuations without ending a technology cycle.

Why this matters now

Thursday's selloff mixed a rate-sensitive market with a new political risk, making the AI trade vulnerable to both.