Tech stocks plunge on worries about AI and Democrats’ midterm landslide

Shares in technology companies dropped sharply Thursday, compounding recent declines that have sparked concerns about the durability of the artificial intelligence boom that has driven much of recent U.S. economic growth.

The tech-focused Nasdaq 100 index dropped 5% in mid-morning trading, to its lowest level in five months.

The broader Nasdaq Composite, which tracks more than just tech stocks, also entered “correction” on Thursday, which is when a stock or index declines at least 10%.

Tech stocks have surged in recent years as excitement about artificial intelligence has fueled billions of dollars in investments in, and by, the companies that make chips and infrastructure necessary for its development and operation.

Since Election Day 2024, the Nasdaq has surged almost 40%.

But questions about whether AI will enable the kind of productivity necessary to generate returns on those investments have grown louder in recent months.

Also contributing to losses were the commanding Democratic victories across the country in Tuesday’s midterm elections.

Numerous Democrats who won races for governor, attorney general, Senate and House seats have pledged to slow or halt the construction of AI data centers.

Texas, Ohio, Michigan and Georgia were of particular concern, because they are all large data center markets.

Elon Musk’s companies, SpaceX and Tesla, each slid around 10%, largely in response to the midterm results.

Musk, the world’s first trillionaire, donated hundreds of millions to help elect Republican midterm candidates. Until Tuesday’s rout, he was seen as one of the largest potential beneficiaries of Republican victories.

Now that voters have so resoundingly rejected the GOP, Musk and his companies face the prospect of tighter regulation and even potential investigations at both the state and federal levels.

The sell-off was triggered by two lackluster earnings reports from major chipmakers, Qualcomm and Arm Holdings, which were released on Wednesday night. Both companies posted results that investors generally viewed as mixed.

In early trading, the two companies led the Nasdaq indexes lower. Qualcomm tumbled 9% while Arm Holdings slipped around 15%.

Earnings reports like these have rattled investors in recent months because of the hundreds of billions of dollars that are being poured into the AI sector.

The S&P 500 also fell nearly 3%, with memory and chip firms SanDisk, Western Digital, AMD, Seagate and Micron all plunging around 10%.

The Dow Jones Industrial Average dropped nearly 700 points. The biggest contributor to the Dow’s drop was Nvidia, which sold-off by 7%, its largest one-day decline since April 2025. Nvidia is the most important supplier to any AI firm, but as investors raise questions about returns, the euphoria in the industry is fading. Nvidia’s shares have tanked 15% over the past three months.

Dow components Cisco and Caterpillar, which are both major suppliers to AI data centers, also dropped around 5%.