Nasdaq suffers its worst day in 18 months amid AI concerns

Sell-off in the technology sector

Nasdaq’s drop was its biggest one-day decline since Donald Trump announced tariffs on US trading partners in April 2025. Concerns over massive AI spending and plans to expand data centers spread across Wall Street and weighed on stock markets around the world.

Chip and storage makers were hit hardest. SanDisk shares fell 22%, while Western Digital dropped 17%. The VIX, known as Wall Street’s “fear index,” climbed 61% to its highest level since the first weeks of the war in Iran.

Analysts link the market’s reaction to expectations that Democratic governors will curb construction of new data centers. Democrats won several gubernatorial races this week, while voters in various parts of the US rejected data-center projects in local referendums.

Neil Wilson, investment strategist at Saxo UK, called the sell-off a broad capitulation by investors in technology stocks. He said the market fears Democrats will slow the development of advanced technology and halt data-center construction. Wilson considers the sell-off excessive, but says the market first needs to find a point of stability.

Losses on US and European markets

The Dow Jones Industrial Average, which includes shares of 30 large US companies, lost more than 1,800 points, or 3.4%, by the end of the day, falling to 51,868. The S&P 500 declined 4.3%.

Among Dow Jones companies, Nvidia shares fell the most, dropping 9.2%. Goldman Sachs followed, down 3.7%.

Gains in European markets in the morning had evaporated by the close. The UK’s FTSE 100 ended at 10,782.66, down 46 points, or 0.4%, from the previous close.

From a rally to concerns over AI returns

The sell-off marked a sharp contrast with Wednesday’s rally, when US stocks posted their biggest one-day gain in several months. Investors had expected Democratic victories in the midterm elections to limit the White House’s room to maneuver.

After that rally, Donald Trump again touted record stock-market performance during his second presidential term. In a post on Truth Social, he wrote that the market had reached another all-time high, cited 91 days of record levels in a short period of less than two years, and said 401(k) retirement accounts were “through the roof.”

Technology analyst Dan Ives says the election results point to slower data-center construction. He said Democrats taking control, especially in the Senate, would create serious obstacles to passing AI and technology legislation in Washington over the next two years.

Ted Parkhill, founder and CEO of Incline Investment Management, described the market mood as a shift from valuing AI’s promises to assessing its costs. He believes AI will change the world over the long term, but that stocks tied to it are not necessarily fairly valued today; the market is bracing for a period of turbulence.

Dataist’s take: The sell-off shows how much expectations for AI depend on the pace of data-center construction and political decisions. Confidence in the technology’s long-term impact does not resolve the question of whether current stock valuations are justified by companies’ actual prospects.