Nasdaq stock index futures rebounded on Friday. Previously, the Nasdaq index had fallen into correction territory, with some investors buying the dip after chip stocks tumbled. The Dow fell 0.99%, the S&P 500 rose 0.22%, and the Nasdaq gained 1.27%. A strong October jobs report pushed up U.S. Treasury yields, limiting the upside for stock indices.
Among the "Magnificent Seven": Nvidia rose 5.66%, Tesla gained 2.16%, Alphabet climbed 1.36%, Meta Platforms advanced 1.02%, Amazon edged up 0.26%, Microsoft slipped 0.98%, and Apple declined 1.12%. Democrats scored a sweeping victory in both chambers of Congress and multiple key gubernatorial races, sparking market concerns that data center construction could face tighter regulation. Those worries dealt a heavy blow to U.S. stocks on Thursday. Thursday's fierce sell-off sent all three major U.S. indices to their worst single-day performance since April 2025. The Nasdaq Composite plunged 5.5%, closing more than 10% below its recent high and entering correction territory as defined by Wall Street. The broad-based S&P 500 dropped 4.4%, while the Dow Jones Industrial Average plummeted over 1,800 points, or 3.4%. All 11 S&P 500 sectors closed lower, with companies tied to the AI infrastructure buildout leading the decline.
Micron Technology shares rebounded 9% after tumbling 17% on Thursday; Nvidia, which had plunged 9% the previous day, rose 3%. "The declines in some market leaders have been quite striking, which also highlights the growing concentration risk in the U.S. equity market," Quilter portfolio manager Stuart Clark said via email. "Today a handful of tech and chip stocks carry extremely high weights in the market, and once these stocks weaken, they quickly drag the Nasdaq and S&P 500 sharply lower."
In just Thursday's single trading session, the combined market capitalization of the "Magnificent Seven" stocks shrank dramatically. After the Democrats' landslide election victory, senior Democratic officials have already begun discussing regulatory restrictions targeting data centers. Texas is a core hub for U.S. data centers, and the state's newly elected governor, Gina Hinojosa, told CNN on Thursday evening: "We will pass laws to protect the people of this state; until those protections are in place, we need to halt current data center construction."
Investors also reacted to the latest nonfarm payrolls report: the U.S. added 165,000 jobs in October, far better than market expectations. Economists surveyed by Dow Jones had expected only 59,000 jobs; the unemployment rate fell back to 4.1%, while economists had expected it to remain unchanged at 4.2%. Even though stocks had surged on Wednesday after the election results came out, the three major indices are still likely to close the week lower. As of Thursday, the Nasdaq was down about 4.4% for the week, and the S&P 500 had fallen nearly 3%; the 30-stock Dow Jones Industrial Average held up relatively well, down only 0.5% so far this week. A look at historical trends shows that tech stocks typically stabilize within 3 to 6 months after a correction, but short-term trading will remain volatile.
The market is very close to the final stage of panic selling
However, some analysts believe this sell-off may have been overdone and that the market may not be far from a near-term bottom. Santiago Mateo Yanguas of CaixaBank Asset Management said: "Thursday's market performance was already very close to the final stage of panic selling." He added: "It may still be too early to say the market has bottomed, but a great deal of risk has already been released, and corporate fundamentals have so far not confirmed the market's most pessimistic AI fears." Allen Huang, vice president of the equity trading department at Mega Financial Holding, said: "Today we will inevitably see more margin accounts forced into liquidation, which means the market may have entered the final stage of panic selling." He added: "Even TSMC at one point hit its single-day limit-down, which is usually a signal that the market decline is entering its final phase. When even TSMC is being sold off, it means almost every stock has already been thoroughly sold."
Hedge funds take a hit
Meanwhile, political uncertainty is battering the AI trade, which was already fragile due to doubts about the return prospects of massive AI infrastructure investments. The market rout triggered margin calls, not only panicking retail investors but also hitting hedge funds. Walleye Capital is returning capital to some investors after suffering its worst monthly performance since March 2020. The macro hedge fund Kirkoswald Asset Management, managed by Greg Coffey, recorded its worst monthly decline since inception. Arini Capital Management, one of Europe's fastest-growing hedge funds and focused on credit investing, lost more than 12% last month alone. Dong Baozhen, chairman of asset management firm Lingtong Shengtai, said: "This sell-off shows that AI stock prices were previously built on overly optimistic fantasies about the future, and now those fantasies have been shattered." He said: "The U.S. stock market has always been the standard-bearer and pillar of the global AI bull market. Now that pillar has broken — can the AI bull markets in other markets hold up on their own?"
About 40% of proposed data center capacity in the U.S. is located in states considering pausing construction. Data from market intelligence firm Cleanview shows that roughly 40% of planned data center capacity in the U.S. is slated for those states. In addition, according to statistics, 46 local ballot measures have passed or are expected to pass, and these measures will also hinder data center development. At least 17 of them directly prohibit the construction of large data centers.
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