Tech stocks plunge as AI spending and data center concerns mount

U.S. technology stocks plunged Thursday, driving the Nasdaq Composite into correction territory as investors weighed the cost of the artificial intelligence boom and the prospect of tighter restrictions on data center construction after this week’s midterm elections.

The Nasdaq Composite fell more than 10% below its recent high, the threshold for a correction. The tech-focused Nasdaq 100 dropped as much as 6.2% before recovering to trade about 4.5% lower in late morning trading, NBC News reported. The S&P 500 was down 3.1% after paring earlier losses, putting it on course for its worst day since President Donald Trump’s global tariff announcement in April 2025.

The Dow Jones Industrial Average fell more than 1,000 points. Nvidia, a major supplier to AI companies, was among its biggest drags, falling about 7%. NBC News reported that its shares had lost 15% over the previous three months.

Chip and memory stocks bore the brunt of the selling. Qualcomm and Arm Holdings each fell about 12% after releasing earnings reports Wednesday night that investors viewed as mixed, according to NBC News. SanDisk, Western Digital, AMD, Seagate and Micron were also among the S&P 500’s steepest decliners. The Guardian reported that SanDisk fell 19% and Western Digital 16.5% during Thursday’s trading.

The declines intensified questions about whether AI will produce returns sufficient to justify the hundreds of billions of dollars companies are investing in chips, infrastructure and data centers. Since Election Day 2024, the Nasdaq has risen almost 40%, NBC News reported.

“I don’t think this is an AI bubble bursting,” said Ed Yardeni, president of Yardeni Research. “I think it’s an AI bubble losing some air very, very rapidly, and I think that reduces the likelihood that we’ll get a bursting bubble that has adverse consequences for the economy and broader financial system.”

Analysts also pointed to Tuesday’s Democratic election victories. NBC News reported that numerous winning Democratic candidates for governor, attorney general and Congress had pledged to slow or halt AI data center construction, with Texas, Ohio, Michigan and Georgia drawing particular concern as large data center markets. The Guardian reported that voters rejected data centers in several local ballots.

“Today is the cold shower that I anticipated might occur after a blue-wave situation,” Yardeni said.

Elon Musk’s companies SpaceX and Tesla each slid nearly 10%, NBC News reported. Musk spent hundreds of millions of dollars supporting Republican midterm candidates; SpaceX has also emerged as a data center developer, the outlet said.

The Guardian reported that Wall Street’s volatility gauge, the VIX, jumped 40%, while losses spread to European markets. Britain’s FTSE 100 closed down 0.4% at 10,782.66. Oil moved the other way: Brent and U.S. crude prices were up about 2% in midmorning trading, according to NBC News.

Neil Wilson, an investor strategist at Saxo UK, described the tech sell-off as a “complete capitulation level event.” He said fears about a slowdown in data center construction appeared “totally overdone,” but added that investors needed to see signs of stability.