Tech Stocks Plunge as AI Investment Uncertainty Rattles Investors

The Facts -

A Tumultuous Day for Tech Stocks Amid AI Data Center Concerns

In a drastic turn of events, tech stocks faced a significant downturn on Thursday as investors reacted to potential shifts in the U.S. political landscape that could hinder the growth of AI technologies. The aftermath of the midterm elections, where Democrats regained control of Congress, has led to fears of a slowed AI boom.

The Nasdaq index, heavily populated with tech companies, plummeted by more than 1,340 points, a 5.2% drop, translating into a loss exceeding $3 trillion in market value. This marked its steepest daily decline since the Liberation Day tariff news in April 2025, according to Bloomberg. Similarly, the Philadelphia Semiconductor Sector index experienced a sharp fall, losing over 1,000 points, which is its largest single-day loss since March 2020.

Major tech players were not spared from the downturn. Meta saw a decrease of 3.4%, Microsoft fell by 2.8%, and Nvidia dropped by 8%.

This selloff reversed the positive trend from Wednesday, sparked by the Democrats' success in the elections, which also included voter support for measures to limit AI data center development in the U.S.

Meta President Dina Powell McCormick highlighted the challenges ahead at a Wall Street Journal conference, saying, “Building data centers in the U.S. is going to be harder. I can also tell you that every hyperscaler is now thinking about ‘Do we need to build outside the United States?’ Because they’re enormous investments, hedging those investments is a wise thing to do.”

Dan Ives, an analyst from Yorkville Ives, in a note to investors, adjusted his forecast for tech industry capex growth, suggesting it will peak next year rather than in 2028 or 2029. This capex surge has fueled economic activity, with Alphabet, Microsoft, Amazon, Meta, Oracle, and neocloud firms investing heavily in AI data centers.

Ives stated, “While Big Tech and hyperscaler capex should still easily exceed $1 trillion in 2027, the growth rate into 2028 will clearly moderate significantly as the data center buildout comes at a much slower pace given the political map especially in the state of Texas.”

He further estimated that up to 20% of planned AI data centers might face extended regulatory processes, impacting capacity expansion in the U.S. Chipmakers were heavily impacted, with Micron and AMD both down 14%.

Simeon Wallis, chief investment officer at Aprio Wealth Management, noted the increased uncertainty in data center expansion across Texas, Georgia, and Ohio, affecting the AI sector. “We see that uncertainty reflected disproportionately in semiconductors, an industry that has been a major beneficiary of AI infrastructure investment,” he said.

Neocloud companies faced similar challenges, with Coreweave experiencing a 9% drop. Meanwhile, Google, a leader in cloud services, saw a more modest decline of 1.6%.

The broader tech sector was not immune, as software companies like Salesforce and Snowflake saw decreases of 3.6% and 6.4%, respectively. Even gig economy and streaming firms like DoorDash, Uber, Spotify, and Netflix suffered declines.

Wallis of Aprio Wealth Management concluded, “Ultimately, we believe that markets can over-react in the short term to speculating who future winners and losers are.”

With additional reporting by Scott DeCarlo and Catherina Gioino.

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