Wall Street sheds $3.2tn as Democratic midterm sweep triggers brutal AI rout

Wall Street's post-midterm rally, the best in 44 years, came to an abrupt end on Thursday. The market dive was triggered by fears surrounding AI stocks after the Democratic sweep of Congress the previous day. The Nasdaq dropped 5.2% and the S&P 500 fell 3.8%, both falling to their lowest levels since the election. The Dow Jones Industrial Average lost over 1,500 points, marking its worst second trading day after a midterm election.

The decline was particularly severe for chip stocks, with AMD, Micron, and Nvidia all losing more than 15% each, while Nvidia alone fell almost 9%. The Philadelphia Semiconductor Index declined by 9.75%, on track for its steepest daily loss since March 2020. Analysts suggested that political pushback could deflate an impending AI bubble, as several states passed measures slowing down data center buildouts.

These states include Ohio, Texas, Georgia, and South Korea, where a Democratic governor was elected. The losses in tech stocks were mirrored by falling oil prices, indicating a broader market correction. Despite the losses, some tech companies, particularly those involved in data center construction, saw their stocks rise.