Chip selloff drags S&P 500 down 4.4%; Nasdaq falls into correction territory

The S&P 500 fell 4.4%, or 334.89 points, to close at 7,353.73 on Thursday. It was the index’s worst day since President Donald Trump’s tariffs shook markets in April 2025, the Associated Press reported, and more than erased Wednesday's post-election rally.

The Nasdaq composite fell 5.5% to 24,315.00. That close left the Index 11.9% below its Oct. 6 record close and in correction territory, defined as a decline of at least 10% from a peak. The Dow Jones Industrial Average lost 1,833 points, or 3.4%, to 51,523.06.

The selloff started in chips, but the contagion spread rapidly to other sectors. The PHLX Semiconductor Index fell 12.3%, and VanEck Semiconductor ETF (SMH) lost 11.2%.

The selling spreads beyond technology to hit all sectors

All 11 S&P 500 sectors closed lower. The small-cap Russell 2000 fell 4.5%, about as much as the S&P 500 itself. The CBOE Volatility Index (VIX), which measures the swings options traders expect in the S&P 500, jumped 70% to 28.18. Trading volume ran about 50% above its recent average, Reuters reported.

The closing bell left the Nasdaq 100 down 6.4%, putting it 11.9% below its all-time high set last month and placing the index in correction territory. The VanEck Semiconductor ETF, SMH lost 11.2% today, and is now 29%**below its Oct. 6 close.

Invesco's S&P 500 Equal Weight ETF RSP, which had recently avoided some of the losses experienced by investors in cap-weighted index funds, fell 2.9% on the day.

Nvidia, the chip company that became the face of the artificial-intelligence boom, fell 9.3%. The Associated Press said it was by far the heaviest weight on the S&P 500, meaning it pulled the index down more than any other stock. Nvidia is down 2.6% this year after gains of roughly 239% in 2023, 171% in 2024 and 39% in 2025.

Advanced Micro Devices fell 17.3% to $404.40, just two days after reporting a 45% jump in quarterly revenue and forecasting more than 80% sales growth next year.

Memory chip makers fell harder still. Micron Technology dropped 17.5%, and SanDisk lost 22.3%.

Arm Holdings fell 13.1% after beating estimates on revenue and earnings, with guidance in line with what analysts expected, Charles Schwab said in its Thursday morning note.

Qualcomm fell 9.5%, despite slightly beating revenue and earnings estimates, Charles Schwab said in its Thursday morning note. But Reuters reported that sales of its smartphone chips fell short of Wall Street’s forecast.

Qualcomm fell 9.5%. Schwab said its earnings and revenue slightly beat estimates, and its outlook matched what analysts had forecast. Chip and AI stocks were lower before the open, Schwab said, taking their cues from those two reports. Schwab also pointed to worry that new U.S. rules could slow demand for data centers.

Charlie McElligott, a cross-asset strategist at Nomura, wrote on Thursday:

"They're shooting the generals."

Yahoo Finance reported that hedge funds were selling the leading AI stocks to protect this year's gains. McElligott said that selling had been "wildly acute" for more than a month.

Treasuries rally as investors flee tech stocks

Bonds rallied as stocks fell. The 10-year Treasury yield slipped to 4.84% from 4.90% late Wednesday, the Associated Press reported. It had topped 5.30% last month.

Meanwhile, Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin both hinted Thursday at further rate increases, Reuters reported, and traders expect another hike next month.

Chipmakers plummet on Democrats' pledge to limit data center construction

Democrats won the House and the Senate on Tuesday, CNBC reported.

Democrats also won governor’s races in Texas, Ohio and Georgia, three states drawing heavy data-center investment. In each race, the Democrat backed a pause or tighter rules on data centers, Politico reported.

Texas Gov.-elect Gina Hinojosa pledged a moratorium on new data-center approvals until the Legislature passes protections, reported the Texas Tribune

Georgia Gov.-elect Keisha Lance Bottoms backed a temporary statewide pause. Ohio Gov.-elect Amy Acton called for stricter conditions on projects that use large amounts of power and water.

Reuters tied the drop to fears that Democratic wins, including in states where opposition to data centers has grown, could slow the AI buildout. Nomura’s Charlie McElligott pointed to hedge funds dumping the year’s biggest AI winners to lock in gains.

Neither explanation is new: The data-center pledges were public Wednesday, and SMH fell 2.7% that day even as the S&P 500 rose. But on Thursday, the selling was no longer contained to chip stocks, but impacted every sector in the S&P 500.

Dan Ives, a technology analyst at Yorkville Ives & Co., wrote on Wednesday, CBS News reported:

"For tech investors, the big focus is will these midterm elections slow the pace of the planned 800 to 1,000 data centers across the U.S. fueling the AI Revolution," he wrote. "The answer in our view is a clear YES."

The Associated Press said Tuesday's victories raised the possibility that governments could force pauses, and that a slowdown would mean fewer chip purchases. It also said these stocks have been swinging for months because borrowing to build data centers has gotten expensive, and because critics said the prices had run too far.

How far the selling reached shows up in two funds that hold the same companies at different weights. State Street SPDR S&P 500 ETF SPY fell 4.4%.