Nasdaq Loses $2.5 Trillion as AI Stocks Plunge After US Midterm Elections

US technology stocks suffered a major selloff as election-driven concerns over data centre expansion, rising financing risks and AI investment returns triggered sharp losses across Wall Street.

Nasdaq Loses $2.5 Trillion as AI Stocks Plunge After US Midterm Elections

Nasdaq Suffers Sharpest Decline Since April 2025

Wall Street witnessed a major technology stock selloff after the Nasdaq Composite dropped 5.5%, marking its steepest single-day decline since April 2025. The sharp fall erased trillions of dollars in market value as investors grew concerned about the future of artificial intelligence infrastructure investments.

The Nasdaq 100, which tracks some of the largest companies listed on the exchange, declined 6.4%, wiping out approximately $2.5 trillion in market capitalisation.

The latest losses followed a strong victory for Democrats in the US midterm elections. Investors fear that the political shift could increase regulatory scrutiny and local opposition to large-scale data centre construction, potentially slowing the expansion of AI infrastructure.

AI Infrastructure Expansion Faces Political Uncertainty

The election outcome has raised concerns about the future pace of data centre development across the United States. Democratic victories in several gubernatorial races have increased expectations of greater scrutiny over projects requiring significant electricity, water and land resources.

Market strategists believe opposition from local communities could make it harder for technology companies to secure approvals for new facilities.

Data centres require substantial power and water supplies, putting pressure on local infrastructure. As a result, projects that have not yet received regulatory clearances could face delays or additional restrictions.

UBS analysts estimated that around 30% of the data centre capacity expected to be added in the US during 2028 could be exposed to potential construction pauses.

Semiconductor and AI Infrastructure Stocks Lead Losses

Companies involved in semiconductor manufacturing and AI computing infrastructure recorded some of the steepest declines.

The Philadelphia Semiconductor Index fell 12%, reaching its lowest level in more than six months. Nvidia shares dropped 9%, while Advanced Micro Devices (AMD) plunged 17%.

The selling pressure also affected companies providing cloud computing capacity to AI developers. These businesses have invested heavily in infrastructure and often depend on borrowing and external funding to support expansion.

The downturn reflects growing investor concerns that expensive data centre projects could be delayed, affecting future revenue and profitability.

CoreWeave and Nebius Face Growing Investor Concerns

AI infrastructure providers CoreWeave and Nebius experienced substantial losses amid concerns about their debt levels and financing requirements.

CoreWeave shares declined 10%, while its five-year credit default swap spreads climbed to a record 1,267.9 basis points, according to S&P Global Market Intelligence. Such instruments reflect market expectations of credit risk.

Nebius shares dropped 15%. Both companies have lost at least half of their market value since the Nasdaq Composite reached its record closing level on October 6.

Credit concerns also spread to Intel, whose five-year credit default swap spreads reached a record 149.7 basis points.

Investors are increasingly examining whether the potential earnings from AI investments can justify the enormous costs associated with building and operating advanced computing infrastructure.

Major Technology Companies Also Trade Lower

The weakness extended beyond smaller AI infrastructure businesses to major technology companies.

Amazon and Alphabet each declined 2.2%, while Microsoft shares fell 3.6%. The software giant is also tightening oversight of certain data centre projects involving Nebius, IREN and Nscale, according to a Bloomberg News report.

Data centre operators Applied Digital, Cipher Digital and IREN each recorded losses exceeding 14%.

Companies supplying equipment and electricity to the infrastructure sector were also affected. GE Vernova shares dropped 7.4%, while Constellation Energy declined 2.5%.

The broader selloff indicates that investors are reassessing the risks associated with the entire AI infrastructure ecosystem.

Market Volatility Rises as AI Investment Concerns Deepen

The CBOE Volatility Index (VIX), widely known as Wall Street's fear gauge, recorded its largest increase since December 2024, reflecting heightened uncertainty among investors.

The Nasdaq Composite has now fallen nearly 12% from its record closing level on October 6, placing it in correction territory. A market correction is generally defined as a decline of at least 10% from a recent peak.

The latest decline also marks the second consecutive session of selling in AI-related stocks and another significant setback for the technology-heavy index.

Market analysts warned that the losses could continue across international markets, with Asian technology shares also facing pressure following the US selloff.

AI Industry Faces a Shift in Investor Expectations

The market downturn highlights a growing change in investor sentiment towards artificial intelligence. While companies previously benefited from strong enthusiasm surrounding AI adoption, investors are now paying closer attention to infrastructure costs, borrowing requirements and the actual returns generated by these investments.

Concerns about the timing of Anthropic's anticipated initial public offering have also emerged, with analysts questioning whether market volatility could affect its plans.

Although AI is expected to remain an important driver of technological development, the latest correction suggests that investors are becoming more selective about companies associated with the sector.

The focus is increasingly shifting from the promise of AI growth to the financial cost of making that growth possible.

Conclusion

The sharp Nasdaq decline highlights growing uncertainty surrounding the AI investment boom. As political opposition, rising infrastructure costs and financing risks challenge data centre expansion, investors are becoming more cautious about technology valuations. Although AI remains a major long-term growth opportunity, companies will increasingly need to demonstrate sustainable returns to maintain investor confidence.