AI stock sell-off sends Wall Street reeling and erases midterm rally gains

A recent sell-off in AI stocks has sent Wall Street into turmoil, erasing gains from the previous day and resulting in the worst drop since 2025, following President Donald Trump's announcement of his "Liberation Day" tariffs. The S&P 500 sank 3.5%, the Dow Jones Industrial Average dropped 2.7%, and the Nasdaq composite fell 4.7%.

This decline affected companies that benefited from the AI technology boom and was exacerbated by the success of the U.S. midterm elections, which could lead to potential pausing of data center construction. Major AI chip stocks, such as Nvidia, Advanced Micro Devices, and CoreWeave, saw significant declines. The impact was widespread, with all sectors in the S&P 500 experiencing losses.

Despite a few bright spots, like AppLovin's 28% increase and Tapestry's 6.6% rally, the overall market sentiment was negative. Financial markets responded to the midterm election results, and oil prices stabilized, while Treasury yields eased. Positive economic indicators, such as a decline in unemployment benefits and improved productivity, may provide some relief for the U.S. economy.