Nasdaq Falls 5.5 Percent as Investors Price in AI Data Center Slowdown After Midterms

The Nasdaq Composite index closed down 5.5 percent on November 5, wiping out approximately $2.5 trillion in market value and marking its deepest one-day decline since April 2025. The drop followed Democratic gains in the midterm elections that raised investor concerns about slower expansion of artificial intelligence data centers.

Nvidia shares fell more than 9 percent, erasing more than $400 billion in market capitalization and wiping out the stock's gains for the year. The Philadelphia Semiconductor Index dropped 12 percent, its worst performance in more than six years. Qualcomm declined 9.5 percent after issuing a quarterly forecast below expectations. Micron and Advanced Micro Devices each fell by double-digit percentages.

The broader S&P 500 fell 4.3 percent and the Dow Jones Industrial Average lost 1,830 points, or 3.4 percent. All 11 S&P sectors closed lower. The Nasdaq 100, which tracks the largest tech names, dropped 6.4 percent. Neocloud companies that lease computing capacity, including CoreWeave and Nebius, fell 10 percent and 15 percent respectively.

Democrats campaigned on restricting data center growth in multiple states. In Texas, Governor-elect Gina Hinojosa called for a temporary moratorium on new projects and the removal of certain tax incentives. Ohio's incoming governor Amy Acton proposed requiring developers to cover utility costs and use union labor. Of 45 data center-related ballot measures nationwide, voters approved restrictions on 39 according to tracking by Data Centers on the Ballot.

UBS analysts estimated that construction pauses could place roughly 30 percent of planned U.S. data center capacity additions for 2028 at risk. Hyperscalers Amazon and Alphabet each declined more than 2 percent. Tesla and SpaceX shares, both linked to Elon Musk who spent heavily supporting Republican candidates, each fell more than 9 percent.

The sell-off began after an initial post-election rally on November 4 and accelerated through Thursday's session. Trading volume was elevated. Chipmakers and infrastructure suppliers for the AI buildout led the declines. The iShares Semiconductor ETF fell 11 percent, its worst day in six years.

Investors had already begun questioning the pace of capital expenditure on AI infrastructure before the election. The midterm results shifted the timeline for regulatory and permitting decisions in states that host the largest planned facilities. Texas and Ohio, both major data center locations, flipped to Democratic governors.

The market reaction erased gains recorded the previous day. Futures indicated continued pressure into the next session. October payrolls data and Federal Reserve commentary on rates remain on the calendar as additional variables. The correction places the Nasdaq more than 10 percent below recent highs in some measures.

Public comments submitted to federal planning bodies on data center projects had already reached high volumes in several jurisdictions. The combination of electoral outcomes and ongoing earnings reports from semiconductor firms produced the concentrated selling in the technology sector.