Nasdaq falls into correction as AI and chip stocks plunge after the midterms: what happened and what it means
The Nasdaq fell nearly 5% on Thursday and entered a correction as investors dumped AI and chip stocks over fears of tougher AI and data center rules. Asian markets fell sharply today. Here's what happened.
Wall Street whipsawed this week. On Wednesday, stocks surged after the US midterm elections. On Thursday, November 5, they reversed hard: the Nasdaq fell about 4.8% and entered a correction as investors dumped AI and chip stocks. By Friday, the selling had spread across Asia. Here is what happened, in plain language.
What happened?
- Wednesday, November 4: the Dow jumped about 1,570 points (3%), its best day since April 2025, after Democrats’ strong midterm results. Reuters reports they won control of Congress.
- Thursday, November 5: the S&P 500 dropped 3.2% and the Nasdaq fell 4.8%, ending more than 10% below its October record, which counts as a correction. It was the Nasdaq’s worst day in about 19 months. The Dow lost more than 1,200 points, wiping out most of Wednesday’s gain.
- Biggest movers: Nvidia fell about 7%, AMD about 12% and SanDisk more than 15%. Microsoft and Amazon each slipped more than 2%.
- Friday, November 6 (Asia): South Korea’s Kospi dropped as much as 8.8% in early trading, triggering a circuit breaker, with Samsung Electronics and SK Hynix each down more than 9%. Japan’s Nikkei fell about 5%.
Why did AI and chip stocks fall?
According to Reuters and Bloomberg, investors worry that the Democratic wins will bring tougher regulation of AI and data centers, which could slow the AI buildout that has pushed stocks to record highs this year. The wins included states such as Texas and Ohio, where data center growth has become a contentious local issue, with concerns about electricity, water and land.
Political voices also added to the nervousness. Senator Bernie Sanders has called for a national moratorium on new data centers, and US Representative Yassamin Ansari has called for a pause on advanced AI development and a ban on artificial superintelligence. Analyst Dan Ives told ABC News he expects the election to hurt the pace of US AI buildout over the next few years.
It is important to note what has not happened. No new law or rule has been passed. Reports say Nvidia had no company news and that no customer has been reported canceling an order. The selloff reflects expectations about future policy, which can change. Supporters of stricter oversight argue that communities should have a say over power, water and costs, while the industry says rapid expansion is needed to stay competitive. We are not taking a side here.
How did companies respond?
On Thursday, OpenAI announced new data center policies it called “responsible AI infrastructure,” including pledges to pay for the electricity and infrastructure its facilities use and to create a water plan for each location. See our report on the OpenAI data center pledge.
Is this connected to last week’s sell-off?
Partly. Last week, worries about heavy AI spending hit Alphabet and Intel (see our earlier sell-off report), and AMD’s strong results on Tuesday briefly calmed things (read our AMD earnings report). Now policy fears have been added. AMD fell about 12% on Thursday, even after its record quarter, which shows how sentiment has shifted.
What does it mean for regular people?
- Your savings: chip and tech stocks make up a big share of many index and retirement funds, so a drop like this can show up in your balance.
- Your gadgets: memory makers such as Samsung and SK Hynix were hit hard, and the memory shortage is still pushing up device prices.
- Your local area: if a data center is planned near you, expect more debate about power, water and bills.
Should you panic?
Corrections are common and not always the start of something worse, but nobody can predict what comes next. This article is general information and not financial advice. Some points many advisers raise: avoid selling in a panic if you invest for the long term, keep your investments spread across sectors, don’t borrow to invest, and keep an emergency fund. If you are worried, talk to a licensed financial adviser.
Frequently asked questions
What is a stock market correction?
A correction means an index has fallen more than 10% from a recent high.
Why did the Nasdaq fall on November 5?
Investors sold AI and chip stocks on fears of tougher AI and data center regulation after the midterm elections, in a day that erased much of Wednesday’s rally.
Has any new AI law been passed?
No. The reaction is based on investor expectations of future policy, not a new rule.
How did markets in Asia react?
On Friday, the Kospi fell as much as 8.8% in early trading and triggered a circuit breaker, and Japan’s Nikkei dropped about 5%.
Sources
- Dow plunges 1,200 points, Nasdaq into correction territory after midterm results stock rally (ABC News)
- Nasdaq set for biggest daily drop in 19 months on fears of AI regulations (Reuters via Devdiscourse)
- US stocks fall sharply as Nasdaq heads for correction (BusinessDay)
- Asian stocks join US selloff as AI rout deepens: Markets wrap (Bloomberg)
- Markets plunge: Nasdaq enters correction as AI stocks sink after midterm elections (InvestmentNews)
- Nvidia stock plunges nearly 8% in steepest drop since April 2025 (IBTimes)
