Nasdaq plunges nearly 4%, enters correction territory as AI stocks crash after Democrats' US midterm victory

US stocks tumbled sharply on Thursday as technology shares faced another wave of selling, wiping out much of the previous session's rally. The Nasdaq Composite plunged nearly 4% and entered correction territory as investors moved away from artificial intelligence-linked companies amid concerns about tighter regulations following the Democratic Party's sweeping midterm election victory.

The tech-heavy Nasdaq declined 3.9%, falling more than 10% below its record high reached last month. The S&P 500 dropped 2.8%, while the Dow Jones Industrial Average lost 1,153 points, or 2.2%, CNBC reported.

The selloff reversed Wednesday's strong gains, when the Dow had surged more than 1,500 points in its best session since April 2025.

AI and semiconductor stocks lead losses

Companies associated with the artificial intelligence boom, particularly semiconductor manufacturers and data centre operators, faced heavy selling for a second consecutive session.

Investors are increasingly concerned that Democratic control of both chambers of Congress, alongside victories in key state elections, could lead to stricter oversight of AI infrastructure development.

Chipmakers Nvidia and Broadcom declined approximately 6% each, while enterprise software company Oracle also fell 6%.

Qualcomm shares plunged 11% despite reporting earnings that exceeded market expectations. The decline followed a weaker-than-anticipated earnings outlook.

The iShares Semiconductor ETF (SOXX), which tracks major chip companies, dropped 8%, reflecting widespread pressure across the semiconductor industry.

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Tesla, SpaceX and AI infrastructure firms decline

Selling extended beyond chipmakers to companies associated with technology and AI infrastructure.

Elon Musk's Tesla declined 9%, while SpaceX fell 7%, according to the market update.

Neocloud companies, which provide specialised computing infrastructure for artificial intelligence applications, also recorded substantial losses.

CoreWeave dropped 9%, Nebius declined 13%, and Iren plunged 14% as investors assessed the possibility of increased regulatory scrutiny.

Concerns include potential restrictions on data centre expansion, electricity consumption and the environmental impact of AI infrastructure.

Defensive sectors attract investors

While technology stocks suffered significant losses, defensive sectors demonstrated relative resilience.

Consumer staples gained more than 1%, while energy and utilities stocks also advanced.

The divergence suggested that investors were reallocating funds towards sectors considered less vulnerable to regulatory uncertainty and technology-sector volatility.

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Oil prices rebound above $90

Crude oil prices also reversed Wednesday's decline as geopolitical uncertainty persisted.

West Texas Intermediate futures climbed more than 2%, moving above $90 per barrel, while Brent crude gained over 2% to approximately $97.

Oil had fallen below $90 in the previous session amid expectations that Democrats could pressure President Donald Trump to de-escalate the Iran conflict.

The renewed rise in crude prices added another layer of uncertainty for investors already grappling with political developments and the sharp correction in technology stocks.

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