The Nasdaq Composite dropped as much as 5 percent on Thursday, a fall that confirms a correction, defined as a pullback of 10 percent or more from its most recent record closing high. The index fell nearly 4 percent to 24,712.60 at one point in the morning, more than 10 percent below the record close of 27,599.89 reached on October 6, and was down 4.54 percent in the early afternoon snapshot carried by Reuters. It is the Nasdaq’s second correction this year, and it erases the previous session’s gains, which had followed the Democratic sweep of both houses of Congress in Tuesday’s elections.
The selling was led by semiconductors. The Philadelphia Semiconductor Index fell as much as 11 percent, its worst performance since March 2020, and more than a dozen large technology stocks were down by double digit percentages. SanDisk fell about 17.7 percent, Advanced Micro Devices about 14.8 percent, Micron about 13.3 percent, Marvell about 13.3 percent, Dell about 12.7 percent, ARM about 12.2 percent and Qualcomm about 11.9 percent, while Nvidia fell about 7.4 percent and Tesla about 10.7 percent. The S&P 500 was down 3.38 percent at 7,428.94 and the Dow Jones Industrial Average down 2.51 percent, with the VIX volatility index up about 49 percent at 24.68.
Analysts cited by Reuters tied the move to the politics of the buildout as much as to earnings. Tuesday’s elections also passed dozens of ballot initiatives nationwide that could limit data center building in coming months and years, and strategists said newly elected members of Congress and governors are looking to slow AI infrastructure development, at a moment when the AI growth story has depended on rapid buildout. Weak earnings from Qualcomm and ARM Holdings added to pressure that had been building for weeks: the Nasdaq shed more than 2.5 trillion dollars in market value in October, hyperscaler results from Alphabet and Meta last month failed to reassure investors about returns on AI spending, and falling free cash flow at the hyperscalers alongside heavy equity and bond issuance to finance data centers, chips and other AI infrastructure has left the trade exposed to any slowdown in construction.
The immediate consequence runs through financing. Reuters reported that selling in stock and bond markets over the past month has reduced access to financing for many participants in the data center buildout, and one strategist described the main driver on Thursday as aggressive institutional selling and de-leveraging by hedge funds and active managers. A bid for Treasuries accompanied the rotation out of chipmaker stocks. Whether the correction stabilises depends on the same variables that drove it: the pace of permitting and political resistance to new data centers, and whether upcoming hyperscaler spending plans show returns catching up with outlays.