Wall Street's AI-fueled rally ran into its sharpest test in months last week, with the Nasdaq Composite plunging 5.5 percent on Thursday — its worst single session since April 2025 — before clawing back much of the loss on Friday as traders reassessed just how much the midterm elections actually change for the industry.
Thursday's rout pushed the Nasdaq roughly 12 percent below its October 6 record, meeting the common definition of a correction, with CNBC estimating the Nasdaq-100's paper losses at close to $2 trillion. Chipmakers bore the brunt: Nvidia fell as much as 9 percent, while memory makers Micron and AMD each dropped more than 17 percent at their lows, though some outlets citing slightly different intraday figures put the AMD and Micron declines closer to 12-13 percent.
What spooked traders
The trigger was political rather than fundamental. Democrats' sweep of both chambers of Congress, paired with governor wins in races where candidates had campaigned explicitly on halting new data-center construction, raised fears among investors that AI infrastructure spending could face new regulatory friction. Qualcomm compounded the selloff by issuing a weaker-than-expected quarterly forecast the same day. Notably, no actual legislation or regulation has been enacted — the selloff reflected anticipatory positioning, not a concrete policy change.
By Friday, sentiment had shifted. The Nasdaq Composite rose 1.09 percent to close at 24,579.42, the S&P 500 added 0.31 percent to 7,376.86, and AMD surged more than 11 percent, even as the Dow slipped slightly. Jefferies analysts described Thursday's move as "reactionary, not a fundamental reset" of the AI investment case.
A market still searching for footing
The whiplash illustrates how sensitive AI-linked stocks have become to political signals, even ones with no immediate legislative consequence. Underscoring the point, strong jobs growth of 165,000 for the month — comfortably ahead of consensus — did little to calm markets on the day it was released, as the data-center narrative dominated trading instead.
Monday's premarket session showed mixed signals as investors weighed the prior week's swings against ongoing questions about chip supply chains, including a separate report that Taiwan Semiconductor had explored producing memory chips for Nvidia — a claim TSMC has since downplayed. Traders say the coming weeks, including Nvidia's November 17 earnings report, will be the real test of whether the AI trade has staying power.
