U.S. stocks plunged Thursday as investors reacted to Democrats’ sweeping midterm election victories. Investors feared the results could lead to tighter artificial intelligence regulations and restrictions on data center construction.
The Dow Jones Industrial Average plunged 1,833.06 points, or 3.44%, closing at 51,523.06. The Nasdaq Composite dropped 5.52%, while the S&P 500 fell 4.36%.
The Nasdaq recorded its worst day since April 2025 and entered correction territory, closing more than 10% below its October 6 record high.
The selloff erased Wednesday’s post-election rally, when the Dow gained approximately 1,500 points in its strongest session in 18 months.
Technology companies were among the hardest hit as investors reassessed the outlook for AI development under a Democrat-controlled Congress.
Nvidia shares plunged 9.26%, while the Philadelphia Semiconductor Index fell more than 12%. Tesla declined 10.77%, and Meta Platforms lost 3.96%.
Companies involved in building and operating AI data centers also suffered major losses. IREN, Applied Digital, and Nebius Group each fell more than 14%.
The downturn wiped out trillions of dollars in market value. According to the New York Post, companies in the S&P 500 collectively lost $2.9 trillion, while Nasdaq-listed companies shed $2.5 trillion. Both figures represented record single-day dollar losses.
The seven major technology companies known as the Magnificent Seven lost a combined $1.04 trillion in market value. Nvidia alone shed approximately $374 billion.
Analysts attributed much of the selloff to concerns that Democratic lawmakers could impose new restrictions on energy-intensive data centers.
Rising electricity prices made data center construction a major political issue during the midterm campaigns, with some Democrats supporting restrictions or temporary pauses on new projects.
“The market’s interpretation is that the AI infrastructure buildout will become slower and more expensive, which is rewriting growth expectations across the whole supply chain,” eToro market analyst Jakub Rochlitz said.
The political shift could have significant consequences for planned AI infrastructure investments.
According to the New York Post, UBS analysts estimated that approximately 30% of planned U.S. data center capacity could be affected by 2028.
Texas, which accounts for roughly 26% of planned data center capacity, also experienced major Democratic victories. Democrat James Talarico won the state’s U.S. Senate race, while Gina Hinojosa defeated Republican Gov. Greg Abbott.
Dan Ives, an analyst at Yorkville Ives & Co., warned that the changing political landscape could significantly slow data center expansion through 2028.
However, some analysts cautioned that the market reaction may have been excessive.
“This feels like the capitulation phase for the data center capex beneficiary stocks, especially the semiconductors,” Jed Ellerbroek, portfolio manager at Argent Capital Management, told Reuters.
“But I think the magnitude of the moves is outsized.”
Bloomberg reported that the selloff extended beyond technology stocks, with investors moving toward safer assets as concerns about the AI industry’s growth prospects spread across financial markets.
Bitcoin fell 5.4%, while U.S. Treasury bonds gained as investors sought protection from further market volatility.