The Nasdaq Composite dropped into correction territory on Thursday as chip stocks sold off. Investors fear that Democratic election wins could bring more regulation of the AI buildout. Other parts of the market appeared to hold up.
The Nasdaq Composite declined 4.9% on Thursday, trading more than 10% below a record set last month, as investors continued to rotate away from technology stocks. The S&P 500 was down 3.2%, and the Dow Jones Industrial Average shed 1,136 points, or 2.1%.
Chipmakers lead the slide
Stocks tied to the AI trade, particularly chips and data centers, slid for a second day. Broadcom and Nvidia each fell 9%, and Qualcomm dropped 13% on a weaker-than-expected earnings outlook despite results that beat estimates. The iShares Semiconductor ETF was down 11%.
Neocloud companies retreated too. CoreWeave lost 14%, Nebius slid 17% and Iren shed 19%, amid worries about a backlash to the industry after the election results.
Election results drive the AI worries
Investors fear that a Democratic sweep of both chambers of Congress, along with wins in key gubernatorial races, could spell more regulation of the AI buildout. According to the Financial Times, a number of newly elected legislators have called for a slowdown in AI development and tighter regulation of the industry.
The Philadelphia Semiconductor Index, meanwhile, was down 8.4% at session lows in morning trading, according to the FT. The Nasdaq Composite was down 3.7% at session lows, which left it 10.5% below its October 6 intraday peak. That put the index in correction territory.
Staples, healthcare and utilities gain
Other parts of the market appeared to hold up. Consumer staples rose more than 1%, and healthcare and utilities stocks were also higher.
The CBOE Volatility Index rose on Thursday as the equity sell-off picked up steam, last standing at 22.59.
Sources: CNBC, Financial Times
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