Nasdaq Experiences Largest Drop in a Year and a Half Amid AI Risks
The U.S. stock market experienced a massive sell-off in technology shares on November 5. The Nasdaq Composite lost more than 5% during trading, approaching its largest single-day decline since April 2025. Investors fear that a Democratic victory in the U.S. midterm elections will lead to tighter regulation of artificial intelligence and a slowdown in data center construction.
This was reported by Reuters, The Guardian, and CNN.
The Nasdaq Composite fell more than 10% from its record close on October 6, when the index reached 27,599.89 points. Such a decline meets the generally accepted definition of a market correction.
The sell-off almost completely erased the gains of the previous trading session. On Wednesday, November 4, U.S. stocks surged after the Democratic Party won congressional elections. However, by the next day investor sentiment had reversed.
Semiconductor manufacturers and companies supporting AI infrastructure came under particularly heavy pressure.
During trading on November 5:
- The Philadelphia SE Semiconductor Index lost more than 11%, falling to its lowest level in more than six months.
- Nvidia shares declined about 9%.
- Advanced Micro Devices (AMD) dropped approximately 15%.
- Shares of cloud infrastructure operator CoreWeave fell more than 11%.
- Nebius quotes declined about 15%.
- Server maker Dell also came under significant pressure.
Selling also hit other major technology companies, including Amazon, Alphabet, Meta, and Microsoft.
According to Reuters estimates, the market capitalization of Nasdaq 100 companies could shrink by more than $2 trillion during trading. This reflects the scale of the revaluation of the technology sector, which in recent years has been one of the main drivers of growth in the U.S. stock market.
One of the main reasons for the sell-off was concerns about the future of data center construction, which is essential for AI development.
After the midterm elections, Democrats gained majority control of both chambers of the U.S. Congress. Additionally, party candidates succeeded in gubernatorial elections in several states where major investments in AI infrastructure are planned.
Investors believe that the new authorities may tighten oversight of data center construction, primarily due to their significant consumption of electricity and water, as well as the strain on local infrastructure.
Analysts at UBS estimate that potential construction restrictions could affect about 30% of the planned expansion of U.S. data center capacity in 2028.
Swissquote Bank analyst Ipek Ozkardeskaya noted that investors are beginning to price in the possibility of a policy shift that in the past two years has facilitated rapid AI infrastructure development.
So far, however, the concerns are mostly market expectations. No new federal legislation directly restricting the development of AI infrastructure has been passed following the elections.
Additional pressure on technology stocks is coming from rising financing costs. Data center construction requires multibillion-dollar investments, and high interest rates increase companies' borrowing costs.
Investors are increasingly questioning how quickly AI investments can generate sufficient profits.
Relatively small cloud infrastructure operators that depend on lending and continuous expansion of computing capacity are particularly vulnerable.
The sell-off spread beyond the technology sector. During trading, the Dow Jones Industrial Average lost more than 1,500 points, or about 2.8%, and the S&P 500 fell about 3.7%.
The CBOE Volatility Index (VIX), used by market participants to gauge expected fluctuations in U.S. stocks, surged roughly 40%. This signals a sharp rise in investor uncertainty.
Analysts note that the decline reflects several factors at once: post-election political risks, doubts about the payoff of huge AI investments, and high borrowing costs.
The figures cited refer to intraday trading on November 5. Final trading results may differ.
