The Nasdaq Composite tumbled 4.55% on Thursday, officially confirming a technical correction as investors retreated from artificial intelligence stocks.
Tech Stocks Drop on Data Center Regulation Fears
The Philadelphia SE Semiconductor index plummeted nearly 10% on Thursday. Investors reacted to the Democratic midterm sweep, fearing stricter regulation and a slowdown in the development of artificial intelligence data centers.
Hardware firms faced immediate pressure as Advanced Micro Devices fell 12% and SanDisk dropped more than 15%.
Melissa Brown, global head of investment decision research at SimCorp, identified political sentiment as the primary catalyst. Investors appear to be recognizing that some newly elected members of Congress and governors are looking to slow the pace of AI infrastructure development,
she said. While it seems unlikely that they will be able to stop it altogether, any slowdown would raise concerns because the AI growth story has largely depended on the rapid buildout of supporting infrastructure.
Lawmakers Target Data Center Expansion
Sen. Bernie Sanders, who caucuses with Democrats, advocated for a national moratorium on data centers. He stated on X that Americans don’t want Big Tech oligarchs wrecking the environment, gutting jobs and threatening humanity’s future.
OpenAI responded by announcing new commitments for responsible AI infrastructure.
The company pledged to cover all electricity and infrastructure costs at its facilities, implement water plans to protect local resources, and create opportunities for local workers and businesses.
Market Losses Spread Across Sectors
The Dow Jones Industrial Average shed 1,403.66 points, or 2.63%, closing at 51,952.46 on Thursday. This reversed the gains from Wednesday, when the index recorded its best one-day performance since April 9, 2025.
Tim Holland, chief investment officer at Orion, said investors are stepping away until they get a better sense of the implications of the midterms around the AI capex cycle in particular, which is the biggest economic tailwind we’ve had going for us for the last, call it, three years.
He added, It’s about tone and tenor from the party that did really well, incredibly well, at the federal level and at the state level.
The iShares Semiconductor ETF (SOXX) recorded its worst day since March 2020. Industrial and financial stocks, including Caterpillar, JPMorgan, and Boeing, also retreated, leading Truist Wealth chief investment officer Keith Lerner to observe, The rubber band is becoming increasingly stretched.
Traders now await Friday’s non-farm payrolls data. Cleveland Fed President Beth Hammack and Richmond Fed chief Thomas Barkin have suggested potential future rate hikes.
Earlier coverage: Nasdaq and Tech Stocks Fall on Chip Valuation Warnings
