The Nasdaq Composite fell sharply on Thursday, giving back a large chunk of the prior session's strong gains, as investors kept selling technology stocks and rotated capital into defensive sectors of the market.
The tech-heavy Nasdaq dropped 4.2%, sliding into correction territory, while the S&P 500 lost 2.6%.
The Dow Jones Industrial Average fell 780 points, or 1.5%.
Even with gains in names such as Chevron and Johnson & Johnson, the 30-stock index could not escape the wave of tech selling.
The Dow gave back roughly half of its big advance from Wednesday.
Stocks tied to the artificial intelligence trade, especially chips and data centers, declined for a second straight session.
The market is worried that Democrats could control both chambers of Congress and capture several key governorships, potentially slowing the buildout of AI computing infrastructure across the United States.
Chip stocks Broadcom (AVGO) and NVIDIA (NVDA) each fell 7% on Thursday, while software company Oracle (ORCL) dropped nearly 5%.
Elon Musk's Tesla Motors (TSLA) and SpaceX each tumbled 9%.
Fellow chipmaker Qualcomm (QCOM) reported earnings that met estimates, but its outlook fell short of expectations, sending the stock down 9%.
Emerging cloud computing names were hit hard on worries about policy risk stemming from state midterm ballot results on data centers: CoreWeave fell 12%, Nebius dropped 17%, and Iren slid 15%.
Beneath the surface, other parts of the market held up relatively well. Consumer staples rose more than 1%, while health care and utilities also finished higher.
Wednesday's trading reflected investors digesting the midterm election results, with Democrats securing a solid majority in both the Senate and the House.
The Dow posted its best single-day performance since April 2025, and both the S&P 500 and the Nasdaq Composite gained more than 1%.
Jordan Watson, a portfolio manager at Tandem Investment Advisors, said the earlier rally and the move out of AI-related names may prove to be temporary.
"As investors digest the election results and potential policy implications, market volatility may rise further," he said. "I do not see Wednesday's stock market performance as a signal that risk has been fully cleared; on the contrary, it is a reminder for the market to think rationally about the enormous amount of capital flowing into AI infrastructure and whether those investments can deliver returns that meet investor expectations."
U.S. crude fell on Wednesday as the market expected Democrats to use their newly won political leverage to pressure President Trump to end the war with Iran, and oil prices reversed course on Thursday.
WTI crude futures were last up more than 1%, near $90 a barrel, while Brent crude rose more than 2%, around $97 a barrel.
Comments