Nasdaq drops 4.8% as US AI and tech shares fall After midterm votes

United States equity markets suffered a steep pullback on Thursday, led by a sharp contraction in artificial intelligence and semiconductor shares following Democrats’ sweeping midterm election victories. The tech-heavy Nasdaq dropped 4.8 percent in midday trading, marking its most dramatic single-session plunge since President Donald Trump announced his sweeping tariff campaign on April 2, 2025, a date he dubbed “Liberation Day.” Broader indices absorbed heavy pressure alongside the tech sector, with the S&P 500 sliding 3.6 percent and the Dow Jones Industrial Average falling 2.8 percent.

The Thursday selloff abruptly halted momentum from a brief post-election rally on Wednesday. Markets had initially surged as traders priced in political gridlock, viewing Democratic wins in Congress as a check against sudden executive policy shocks while taking reassurance from the administration’s stated intent to accept the vote count. However, institutional positioning shifted overnight as portfolio managers parsed the localized policy headwinds facing high-growth technology infrastructure.

The Bottom Line:

The Nasdaq tumbled 4.8 percent on Thursday, logging its worst session since the administration’s April 2025 tariff announcements.
Voters approved 39 out of 45 local ballot measures restricting data center expansions across the country, threatening capital expenditure pipelines.
AI market leader Nvidia fell 8.2 percent, while neocloud operators CoreWeave and Nebius Group dropped 12 percent and 17 percent, respectively.

Voters Approve Local Restrictions on Data Center Developments

The core catalyst for Thursday’s rout originated at the ballot box rather than Capitol Hill. Across the country, voters weighed in on 45 distinct local ballot initiatives targeting data center developments. The electorate approved restrictions on 39 of those measures, while only a single initiative in North Dakota voted against curbs.

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This localized regulatory push threatens the multi-year capital expenditure cycle underpinning the artificial intelligence boom. According to estimates from UBS analysts cited by Reuters, potential construction pauses could jeopardize roughly 30 percent of planned US data center capacity additions scheduled for 2028. Hyperscalers and semiconductor manufacturers now face rising compliance hurdles and potential margin compression as municipalities exercise zoning powers to limit high-consumption facility builds.

“Yesterday, markets rallied on certainty as election results removed a layer of uncertainty. Today, portfolio managers and analysts are digging into the implications and adjusting expectations for potential political resistance to AI infrastructure, particularly at state and local levels,” said Michael Monaghan, portfolio manager of Founders 100 ETF, in an interview with Al Jazeera. “We’re seeing that concern reflected in the selloff across semiconductors and hyperscalers.”

The market reaction was swift across the hardware supply chain. CoreWeave shares plunged over 12 percent, while Nebius Group slumped nearly 17 percent. Among major semiconductor designers, market leader Nvidia dropped 8.2 percent, Micron fell nearly 14 percent, and Intel declined 6.8 percent. Infrastructure providers absorbed equal damage, with AI server manufacturer Dell dropping nearly 13 percent.

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Mega-cap platform operators also traded lower. Amazon slipped 2 percent, and Meta Platforms declined 3.8 percent. The broader market rotation extended beyond software and chips, impacting transportation and aerospace equities closely tied to Elon Musk.

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SpaceX shares dropped 9.5 percent following the session’s opening bell, while Tesla fell over 11 percent. The dual-company selloff reflects investor sensitivity to regulatory oversight and the potential cost of direct political engagement by corporate executives.

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Capital Flight and Sector Rotation Across Global Exchanges

As institutional investors unwound risk-on positions in US growth assets, capital sought traditional safe-haven instruments. Spot gold prices jumped just over 1 percent to hit $4,115 per ounce, marking a two-week high for the precious metal as macroeconomic uncertainty mounted.

European equity benchmarks mirrored the downward trajectory of US markets. The primary European stock index finished lower on Thursday as institutional desks reassessed valuations following the Democratic congressional sweep.

“It’s really a story of a rotation happening from technology to non-technology and from the US to non-us markets as a result of the midterm elections and the very aggressive Democratic sweep,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, to Reuters.

At the same time, higher borrowing costs and localized zoning fights over data centers signal that the physical buildout of the digital economy faces a protracted, expensive bottleneck through 2028.

Disclaimer: The information provided in this article is for educational and market analysis purposes only and does not constitute financial, investment, or legal advice. Always consult with a certified financial professional before making investment decisions.