US stocks suffer worst rout since 2020: Dow plunges 1,800 points, Nasdaq crashes 5.5% as AI fears wipe out $3 trillion

Wall Street's AI rally hit a major roadblock on Thursday as fears of tighter regulation and slower data centre expansion sparked a widespread selloff in technology stocks, which resulted in a wipeout of around $3 trillion from the S&P 500 market value. The Nasdaq Composite tumbled 5.46%, marking its biggest one-day fall in 19 months and pushing the index into correction territory, Reuters reported.

S&P 500 lost 331.94 points, or 4.32%, to end at 7,353.65 points, while the Nasdaq Composite lost 1,421.50 points, or 5.46%, to 24,315.02. The Dow Jones Industrial Average fell 1,842.69 points, or 3.45%, to 51,513.43.

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The Nasdaq Composite index closed more than 10% below its October 6 record high, marking its biggest daily percentage drop since US President Donald Trump's tariff announcement in April 2025. The S&P 500 also recorded its deepest fall since April 2025. S&P 500, Nasdaq and Dow all notch biggest one-day drops since April 3, 2025. The Russell 2000 fell 127.06 points, or 4.4%, to 2,729.89. The Philadelphia SE Semiconductor Index posted its largest single-day percentage drop since March 2020.

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The selloff followed Democratic victories in Tuesday's midterm elections, including in states where opposition to new data centres has been growing. Investors are increasingly concerned that political resistance and tighter regulations could slow the infrastructure expansion underpinning the AI boom.

"Investors appear to be recognizing that some newly elected members of Congress and governors are looking to slow the pace of AI infrastructure development," Melissa Brown, global head of investment decision research at SimCorp.

Chipmakers and AI infrastructure stocks tumble

Nvidia and other major chipmakers led the declines as investors reassessed the outlook for companies supplying components to AI data centres. Qualcomm also fell after missing Wall Street estimates for fourth quarter smartphone chip sales, according to Reuters.

The weakness extended beyond semiconductors. Data centre operators IREN and Applied Digital, alongside neocloud companies CoreWeave and Nebius Group, suffered sharp losses. AI linked utilities and equipment suppliers GE Vernova and Constellation Energy also declined.

Meta Platforms, Amazon and Alphabet fell after gaining ground in Wednesday's rally. Tesla and SpaceX also traded lower.

Jed Ellerbroek, portfolio manager at Argent Capital Management, described the decline as a possible capitulation phase for stocks benefiting from data centre capital expenditure, but said the scale of the moves appeared excessive.

Fed outlook and jobs data in focus

The selloff came a day after the S&P 500 recorded its biggest one day percentage gain in three months, Reuters reported. Some analysts believe a divided government in Washington could limit major legislative changes and make agreement on fiscal spending more difficult.

Meanwhile, Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin signalled support for gradual interest rate increases in their Thursday remarks.

Investors now turn to Friday's October US nonfarm payrolls report for fresh clues on the economy and the Federal Reserve's next move. Traders continue to expect another rate increase in December, according to Reuters.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)