Nasdaq plunges into correction as AI chip stocks tumble on midterm fears

The Nasdaq Composite fell as much as 5.5% on Thursday and slipped into correction territory as investors weighed whether Democrats' midterm gains could slow the AI data center buildout, with AMD, Micron and Nvidia leading a broad chip selloff.

The tech-heavy Nasdaq Composite plunged as much as 5.5% on Thursday, sliding into correction territory more than 10% below its October 6 record high and heading for its worst day in five months. By midday, the S&P 500 was down about 3.4%, the Dow Jones Industrial Average about 2.6% and the Nasdaq 100 about 5.2%, erasing more than $2 trillion in market value.

The selloff was a sharp reversal from Wednesday's post-midterm rally, when the Nasdaq gained 1.44%. Investors are weighing whether a Democratic-controlled Congress and Democratic state officials could tighten rules on artificial intelligence and slow the construction of data centers, including in states such as Texas that are hubs for planned projects.

Chipmakers led the declines. AMD tumbled about 13% days after reporting what CEO Lisa Su called "the largest and most profitable" quarter in its history, while Micron fell more than 12%, Qualcomm about 10%, Intel about 8% and Nvidia about 7%. The Philadelphia Semiconductor Index dropped more than 9% to its lowest level since mid-April. Tesla fell more than 10%.

A silicon wafer with semiconductor chips (illustrative photo)

Qualcomm added to the pressure after reporting fiscal fourth-quarter handset chip revenue of $5.14 billion, down 26% from a year earlier. On Wednesday, Democratic Rep. Yassamin Ansari called for a pause on advanced AI development until adequate regulations are in place.

Jordan Watson, a portfolio manager at Tandem Investment Advisors, said the pullback from AI stocks may prove temporary, but warned that markets could face more volatility as investors digest the election results and their potential policy implications.

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