Wall Street Slumps a Day After Midterm Rally: Dow Falls About 1,200 Points, Nasdaq Enters Correction

The Dow Jones Industrial Average plunged about 1,200 points on Thursday, eroding most of the rally from a day earlier when midterm election results propelled the index to its best trading session in more than a year.

The S&P 500 dropped 3.2%, while the tech-heavy Nasdaq fell 4.8%, putting the index into correction territory, meaning it has fallen more than 10% from a previous peak last month.

The Nasdaq was on track for its worst day in 18 months, heading for its biggest one-day fall since Donald Trump announced his 'liberation day' tariffs on US trading partners in April 2025.

The selloff hammered many artificial intelligence firms as investors appeared to digest risk for the sector posed by newly empowered Democrats, many of whom ran campaigns critical of artificial intelligence data centers.

Nvidia, the chipmaking giant behind many of the semiconductors used in AI products, dropped 7% on Thursday. Rival chipmaker Advanced Micro Devices saw shares fall 12%. SanDisk, another AI hardware firm, plummeted more than 15% in value.

The slide also hit some other major tech firms behind AI development. Microsoft, which holds a large stake in OpenAI, saw its stock price fall more than 2%. Amazon, which has spent hundreds of billions on its build-out of AI infrastructure, also dropped more than 2%.

Wall Street's 'fear index', the VIX, jumped by 40% to its highest levels since the early weeks of the Iran war, in a sign of rising market volatility.

The downturn in markets largely reversed blockbuster gains from the previous session. On Wednesday, the Dow jumped 1,570 points, or 3%, recording its best one-day performance since April 9, 2025, when President Donald Trump announced the suspension of a far-reaching set of reciprocal tariffs.

Analysts pointed to expectations that Democratic governors will clamp down on the rollout of new datacentres after the party won a series of gubernatorial races this week. US voters also rejected datacentres in a series of local ballots about the issue across the country.

Even as stocks climbed on Wednesday, Yorkville analyst Dan Ives warned ABC News of potential midterm fallout for the tech sector. "The Democratic blue tidal wave across the Senate and House was a seismic shift that will have a negative impact on the pace of the AI Revolution buildout in the US over the next few years," Ives told ABC News in a statement.

Tuesday's midterm elections catapulted Democratic Senate and gubernatorial candidates to statewide victories in Republican strongholds like Ohio and Texas, both of which play host to a number of AI data centers. A strong performance in House contests, meanwhile, appeared to set Democrats on a path toward a comfortable majority in the lower chamber.

Neil Wilson, investor strategist at Saxo UK, said a "complete capitulation level event" was playing out in tech stocks on Thursday, adding that the fear is a total momentum unwind but that in a 'sell everything' market, stability needs to be looked for first.

OpenAI unveiled a new set of data center policies Thursday that it called "responsible AI infrastructure" in the aftermath of the election. The ChatGPT maker said it would abide by fresh commitments, including a vow to pay for all electricity and infrastructure used at its facilities, create a "water plan" for each location, and create opportunities for local workers and businesses.

An early stock market rally in Europe had also fizzled out by late trading, with Britain's FTSE 100 closing down 46 points or 0.4% at 10782.66.