Nasdaq Plunge Wipes $2.5 Trillion Off Stocks

The Nasdaq plunge notched the tech-led index’s deepest one-day drop since April 2025 on Thursday, wiping trillions in market value as fears grew that the Democrats’ midterm win could slow the artificial intelligence boom.

The Nasdaq plunge saw the Nasdaq Composite fall 5.5 per cent on fears that the Democratic midterm victory could stall AI infrastructure expansion and force a reckoning for smaller firms already squeezed by higher rates and tighter financial conditions.

It was the second straight day of selling in AI stocks, and the fifth decline of more than 500 points in the Nasdaq Composite since mid-October.

The Nasdaq is now in correction territory, having lost nearly 12 per cent from its record close on October 6. A correction is a 10 per cent drop from a recent peak.

Nasdaq plunge: data centres at the centre of the selloff

“The big election outcome was, especially with the Democrats winning a lot of the governorships, that the slowdown of the data center buildout is the real key theme that’s going to stick,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

Chip and neocloud shares fell sharpest, on worries that data centre buildouts worth billions could face delays. The Philadelphia SE Semiconductor index fell 12 per cent to its lowest in more than six months. Nvidia dropped 9 per cent and Advanced Micro Devices slumped 17 per cent.

Wall Street’s fear gauge, the VIX index, posted its largest increase since December 2024.

Hyperscalers, which had defied Wednesday’s AI selloff, also dropped. Amazon.com and Alphabet each slid 2.2 per cent. The Nasdaq 100 fell 6.4 per cent, erasing $2.5 trillion in market value.

The selling suggests investors are starting to factor in local opposition to the data centre buildout, and the costs it has imposed on US communities.

“There’s going to be a lot of pushback about those data centers being geographically located in someone’s backyard, straining the power grid, straining the water systems,” said Bruce Zaro of Granite Wealth Management.

Around 30 per cent of expected US data centre capacity additions in 2028 could be at risk from construction pauses, UBS analysts estimated. The jitters are hitting an AI trade already on shaky footing over returns on the enormous sums being poured into the technology.

AI winners wilt as neocloud firms slide

Neocloud company CoreWeave, a barometer of investor anxiety over heavy AI spending, slumped 10 per cent. Its five-year credit default swap spreads widened to a record 1,267.9 basis points, according to S&P Global Market Intelligence. Nebius dropped 15 per cent. Shares of both firms have dropped by half or more since the Nasdaq hit a record on October 6.

“The market’s moving from the promise of AI to the price of AI,” said Ted Parkhill of Incline Investment Management. “There’s no question that AI is going to be transformative in the long run. But that doesn’t mean every AI-related stock is currently priced appropriately.”

Data centre operators Applied Digital, Cipher Digital and IREN tumbled more than 14 per cent each. GE Vernova fell 7.4 per cent, while Constellation Energy slipped 2.5 per cent. Microsoft declined 3.6 per cent as it tightens oversight of some data centre projects, Bloomberg News reported.

Some analysts wondered if the wipeout could affect the timing of Anthropic’s blockbuster IPO, expected this fall. Anthropic has already filed for its public listing.

Many analysts said further selling is likely, starting with Friday’s sessions in Asia. Japan’s Nikkei and South Korea’s Kospi have risen more than 20 per cent this year, but fell after Wednesday’s rout.

The rout reaches Pakistan’s market too

The selloff was not confined to the United States. Asian stocks tumbled as the AI rout spread from US markets, and Pakistan’s market felt the pressure, with the PSX dropping 1,494 points by midday. Wall Street stocks had already slid on AI and data centre fears earlier in the week.

For Pakistani investors, the message is that the AI trade, which has driven global markets for two years, is being repriced on doubts about costs, permits and returns.

How far did the Nasdaq fall?

The Nasdaq Composite fell 5.5 per cent on Thursday, its deepest one-day drop since April 2025, and is now down nearly 12 per cent from its October 6 record.

How much value was wiped out?

The Nasdaq 100 fell 6.4 per cent, erasing $2.5 trillion in market value.

What is a market correction?

A correction is a drop of 10 per cent or more from a recent peak. The Nasdaq has lost nearly 12 per cent since its record close on October 6.

Why did AI stocks fall?

Investors fear the Democratic midterm win could slow the data centre buildout, while financing worries and doubts about AI returns have also weighed on the sector.