PiCK

Summary

  • A selloff in AI-related shares wiped out about $3.2 trillion in market value from U.S. stocks in a single day.
  • The Nasdaq, S&P 500, and Nasdaq 100 tumbled, with the Nasdaq entering a technical correction as worries over data-center regulation and the burden of massive AI investment spending intensified.
  • Investor sentiment weakened sharply as major technology and growth stocks including Nvidia, AMD, and Tesla, along with the broader AI supply chain, posted double-digit declines.

Forecast Trend Report by Period

Nasdaq Plunges 5.52%, Enters Correction

Nvidia Drops 9%, AMD Sinks 17%

Data-Center Curbs Add to Concerns Over Heavy AI Spending

U.S. stocks in New York tumbled as investors dumped artificial-intelligence shares. Fears that data-center regulation could tighten after Democrats swept the midterm elections compounded concerns over the massive cost of AI investment. About $3.2 trillion in market value was erased from the U.S. stock market in a single day.

On Nov. 5, the Nasdaq Composite fell 1,421.52 points, or 5.52%, to close at 24,315.00. The S&P 500 dropped 334.89 points, or 4.36%, to 7,353.73. The Dow Jones Industrial Average lost 1,833.06 points, or 3.44%, to end at 51,523.06.

The S&P 500 posted its biggest one-day decline since April last year, when markets were jolted by President Donald Trump's tariff announcement. The Nasdaq has now fallen 11.9% from last month's peak, putting it in a technical correction. A drop of 10% or more from a recent high is generally considered a correction. The Nasdaq 100, which tracks large-cap technology stocks, slumped 6.4%.

Investors who had welcomed the midterm result reversed course within a day. In the previous session, the Dow rose 3.0% and the Nasdaq gained 1.4% on expectations that political uncertainty had eased after Democrats took control of both chambers of Congress. But major indexes gave back those gains from the opening bell as concerns mounted that data-center construction and AI development could face new constraints.

Investor sentiment was shaken by the election of Democratic figures who had called for halting new data-center construction and slowing the pace of advanced AI development. Delays to construction schedules could affect demand not only for AI semiconductors and servers, but also for power and cooling equipment and cloud services. UBS estimated that about 30% of the U.S. data-center capacity expected to be added by 2028 could face disruption because of construction halts and related measures.

Doubts over whether the huge sums large technology companies are pouring into AI, even through increased borrowing, will generate sufficient returns also fueled the selloff. Financing costs are already elevated because of high interest rates. Added to that was the risk that regulation could delay business timelines.

Nvidia plunged 9.3%, wiping out more than $400 billion in market value in a day. AMD and Micron Technology fell 17.3% and 17%, respectively. Broadcom and Qualcomm dropped 10% and 9.5%. Storage makers Sandisk and Western Digital slid 22% and 17%.

CoreWeave and Nebius, which rent out AI computing resources, also posted double-digit declines. GE Vernova, which supplies power equipment for data centers, fell 7.5%. What began in semiconductors spread across the broader AI supply chain, including data centers and power infrastructure.

Tesla and SpaceX fell 10.8% and 9.1%, respectively. The moves reflected concerns that the Democratic victory could raise the political and regulatory burden on both companies after Elon Musk spent about $500 million backing Republican candidates in the election. Democrats also won the governor's race and the Senate contest in Texas, where both companies are headquartered.

The slide drove demand for haven assets including U.S. Treasuries. The 10-year Treasury yield fell to 4.84% intraday from 4.90% a day earlier. Brent crude, by contrast, rose 3.9% on uncertainty surrounding the war with Iran. The stock selloff tied to AI-investment concerns was compounded by inflation risks stemming from higher oil prices.

Doohyun Hwang