The Nasdaq plunged more than 5% on Thursday and fell into correction territory, led downward by a broad retreat from AI, chip and data center stocks as investors digested the consequences of Democrats' sweep in Tuesday's midterm elections.
The tech-heavy index dropped 5.1% in afternoon trading after falling as much as 5.5% intraday, leaving it more than 10% below the record it set in October — the technical definition of a correction. The Dow Jones Industrial Average lost 1,097 points, or 2.1%, erasing the gains from its best day in 18 months just a day earlier, and the S&P 500 tumbled 3.2%, according to the New York Post's market coverage. Semiconductor stocks were hit hardest, with the chip index falling roughly 12% and Nvidia tumbling over 9%.
For more on how the election is reshaping the industry, see our AI industry coverage.
Neoclouds and Data Center Operators Led the Decline
The steepest losses were concentrated in companies whose revenues depend directly on the AI buildout. CoreWeave, one of the leading "neocloud" firms that buys AI compute and leases it to other companies, plunged 14.6%, while rival Nebius fell 18%. Data center operators Iren and Applied Digital dropped 20% and 19.7% respectively, and equipment maker GE Vernova lost 9.2%.
The selloff reflected a straightforward repricing: if the pace of data center construction slows, the companies leasing capacity and selling equipment to AI labs lose their growth trajectory.
Why the Election Sparked It
Democrats won decisive control of both the House and Senate on Tuesday, and data centers were "front and center" in exit polls across the country, according to Meta President Dina Powell McCormick, speaking at the Wall Street Journal's Tech Live conference Wednesday.
The ballot measures reinforced the point. Voters considered roughly 50 referendums related to data center construction this week, and rejected them in at least 46 cases — a striking rebuke of projects that local officials had courted for the jobs and tax revenue they promise.
Texas may matter most. The state is home to roughly 26% of planned data center capacity in the United States, and Democrats won both of its top races: James Talarico took the Senate seat while Gina Hinojosa unseated three-term Governor Greg Abbott, with every county in the state shifting left.
"The growth rate into 2028 will clearly moderate significantly as the data center buildout comes at a much slower pace given the political map, especially in the state of Texas," Dan Ives, partner and analyst at Yorkville Ives & Co, wrote in a Thursday note.
UBS analysts estimate that construction pauses could affect around 30% of planned data center capacity in 2028.
Powell McCormick added that the opposition could push investment offshore: "I can also tell you that every hyperscaler is now thinking about, 'Do we need to build outside the United States?' Because they're enormous investments, hedging those investments is a wise thing to do."
AI Giants Rush to Stem the Fallout
The industry's public-relations pivot was already underway before the votes were counted. On Thursday, OpenAI released its "National Community Compact," a framework for data center construction that includes pledges to reduce power usage during peak times, publish data on noise, water and energy impacts, guarantee that local residents don't foot the bill for higher electricity costs, release construction plans publicly, limit non-disclosure agreements with local officials, and set local hiring goals.
OpenAI has even been testing a rebrand, preferring "compute campuses" to "data centers." Chief Global Affairs Officer Chris Lehane told Bloomberg the company had spent months talking to residents, officials and candidates in states including Georgia, Ohio and Texas while putting the compact together — work that predated, but clearly anticipated, the political backlash.
There are early signs the industry's engagement can soften the hardest-line opposition. Powell McCormick said a governor who campaigned on construction pauses has already asked to meet: "As soon as we get past the inauguration, let's meet because we don't want to lose this investment in our town. We don't want these jobs to go elsewhere."
What Happens Next
Thursday's rout extended a losing stretch for AI-linked equities that began in late October on worries about debt-fueled infrastructure spending, and it puts the sector's one-time premium to a real test. The open questions now are legislative: whether congressional Democrats pursue restrictions on data center construction, power pricing or AI regulation, and how far state-level moratoria spread in 2027.
Investors will be watching whether the White House and the industry's new outreach can decouple the AI buildout from its political unpopularity — because Thursday's tape suggests markets now believe the two are tightly linked.
The Wall Street Journal framed the session the same way, noting that investors were retreating from the AI trade wholesale rather than rotating within it. After two years in which AI optimism lifted nearly every boat in the tech sector, the midterm results gave skeptics the first concrete political event to price — and they did so with a speed that few market participants had fully anticipated.
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