US stocks suffered their worst single-day plunge since the COVID-19 pandemic overnight, with the Nasdaq 100 index tumbling more than 6% and shedding US$2.3 trillion in market value in a single session. The storm swept across nearly every asset class, from chip giants to defensive consumer stocks, leaving no sector unscathed.
Goldman Sachs equity trader John Flood described the abrupt market shift as "yet another completely different day," stating bluntly that "the level of pain has reached an extreme." Greg Taylor, Chief Investment Officer at PenderFund Capital, compared the current situation to the collapse of the dot-com bubble and the subprime crisis. He said the entire market has become overly concentrated in a single theme — AI — and the unwinding of that theme has been far too violent. "This was something that was bound to happen sooner or later," he said.
From Wednesday's rally to the overnight rout, market logic underwent a fundamental reversal within just 48 hours. Democrats swept both chambers of Congress in the midterm elections, and investors had previously bet that a divided Washington would check Trump's power and accelerate an end to the Iran war. Now, investors are rapidly repricing a core narrative: a Democrat-controlled legislature could slam the brakes on AI-related spending and data center construction.
What is even more alarming is that this selloff has yet to show any clear sign of stabilization. Institutional buying is collectively absent, retail investors continue to sell on a net basis, and forced liquidation by systematic strategy funds may persist. Multiple market participants noted that the bottom of this selloff is very likely still ahead.
Chip Stocks Wiped Out, Tech Sector Bleeds Heavily
Thursday's heaviest losses were concentrated in the core of the AI supply chain. The Philadelphia Semiconductor Index plunged 12% in a single day, marking its worst one-day decline since March 2020. Its cumulative drop from the June 22 high has now exceeded 38%, officially entering bear market territory.
Nvidia, the world's most valuable company, fell more than 9% on the day — its largest single-day drop since January 2025 — erasing all of its year-to-date gains. Storage stocks were slaughtered: SanDisk plummeted 22%, while Western Digital dropped 17%. The NeoClouds sector once again led declines, falling roughly 20% since the election.
The S&P 500 fell 4.4%, with the technology sector as a whole declining about 7%. All 30 components of the Dow Jones Industrial Average closed lower. The iShares MSCI USA Momentum Factor ETF, which tracks momentum strategies, plunged 8.2%, its worst single-day performance since 2020.
A Goldman Sachs basket of the most heavily shorted stocks fell nearly 8%. An index of unprofitable tech companies including Roku and Peloton dropped 7.7%, while high-risk companies with heavier debt loads fell about 4%. The Russell 2000 small-cap index tumbled roughly 4.5%, entering a technical correction range.
Volatility Spikes, Market Signals Deeper Correction
Market fear gauges flashed warnings in tandem. The VIX index surged to its highest level since early April. The CBOE Volatility Index jumped 11.57 points in a single day to close at 28.18, its highest since March of this year. The VIX expected volatility measure posted its largest single-day point gain since the 2018 "Volmageddon" event.
Another notable technical signal: implied volatility on options tracking short-term QQQ swings premiumed over the long-term volatility of the S&P 500 ETF (SPY) for the first time since late July. This is typically seen as a precursor to heightened investor uncertainty about market direction. The spread between VIX spot prices and three-month futures widened to its broadest level since April 2025 — a pattern that historically tends to foreshadow deeper declines.
Nomura strategist Charlie McElligott noted that the market's current negative gamma exposure is "enormous," meaning that downward price moves will continue to trigger trend-acceleration mechanisms. Self-reinforcing selling pressure has not yet dissipated.
Retail Selling and Institutional Forced Liquidation Compound
The sell-side structure of this crash shows a compounding of active retail selling and forced institutional deleveraging.
Data from Vanda Research shows that within 30 minutes of Thursday's open, retail investors' selling of US individual stocks hit the largest single-period record since October, concentrated mainly in tech stocks. Total selling volume is expected to match the peak capital outflow seen in late July.
Meanwhile, UBS noted that retail selling triggered risk-control mechanisms in the futures market and forced liquidation of leveraged ETFs, further amplifying the decline. Michael Monaghan, Partner and Portfolio Manager at Founder ETFs, described the current market as a double whammy of a "buyers' strike" and "forced liquidation by pod shops" — large long-only funds have stopped buying the dip, while hedge funds are selling across all positions.
Goldman Sachs Prime Brokerage data confirms this chaotic picture: the previous day's rotation and hedge unwinding had temporarily stabilized the market, but Thursday devolved into a full-scale "delta-one deleveraging" across the tech sector.
Democratic Blue Wave Reprices AI Narrative
The initial reaction following the election results was exactly the opposite of Thursday's crash. On Wednesday, investors broadly bet that a divided Washington would check Trump's power and push the Iran war toward an end, easing inflation and rate pressure, and stocks rallied notably.
However, these dip buyers were quickly swallowed by the reversal. Michael O'Rourke, Chief Market Strategist at JonesTrading Institutional Services, said buyers entered "too fast." He noted that while next year's earnings expectations make the price-to-earnings ratios of related tech stocks appear reasonable, once the policy environment undergoes a structural shift, the outlook for data center construction will fundamentally change — and existing earnings forecasts will be invalidated accordingly.
It is precisely this repricing of policy expectations that directly struck the companies with the highest valuations and the greatest dependence on AI capital expenditure.
Bottom Not Yet in Sight, Divergence Grips Market
There is clear divergence over when the selloff will end.
UBS analysts said retail investors made small purchases Thursday afternoon, possibly approaching a phased "capitulation point," but selling by systematic risk-control funds is expected to continue on Friday at a scale exceeding US$100 billion. The analysts judged that US futures market liquidity during Monday's Asian trading session will be at its thinnest, potentially repeating the crash paths of August 2024 and April 2025 — where Thursday-to-Friday selling triggers follow-on hedge fund liquidations before Monday's open, and that is when the true bottom arrives.
Wedbush analyst Dan Ives warned that chip stocks still have 10% to 12% of further downside. Fundstrat's Tom Lee took the opposite stance, calling the AI sector selloff an "overreaction" and predicting tech stocks will rebound 20% from current levels.
Eric Diton, President of The Wealth Alliance, said he has gradually reduced AI stock positions and shifted into energy stocks to hedge against high oil price risk. He said bluntly: "This selloff is extremely violent. The kind of optimism we saw a few days ago simply cannot be sustained anymore."
Comments