AI Trade Rout Drags S&P 500 Down 4.4% After Election

The S&P 500 index lost 4.4% on Thursday, marking its steepest decline since the market turmoil triggered by President Donald Trump's tariff announcement in April 2025.

The sell-off followed a day of record highs for the U.S. stock market, wiping out those gains entirely. The Dow Jones Industrial Average dropped 1,833 points, or 3.4%, to close at 51,523.06. The Nasdaq composite, which holds many technology stocks, fell 5.5% to 24,315.00. That decline pushed the Nasdaq 11.9% below its all-time high set last month, a drop that traders classify as a market correction.

The pressure on tech stocks stems from ongoing concerns about the cost of building artificial intelligence data centers. Borrowing costs have risen, leading some critics to argue that AI stock prices had become inflated. The U.S. midterm elections on Tuesday added a new layer of uncertainty. Democratic victories nationwide raised the possibility that future governments might pause data center construction. Voters have expressed dissatisfaction with rising power bills attributed to these facilities. Any halt in construction would reduce demand for chips, electricity, and other services that currently drive a large portion of economic growth.

Nvidia, the leading chip supplier for the AI boom, led the index lower with a 9.3% drop. The company is now down 2.6% for the year, following annual gains of approximately 39%, 171%, and 239% in the previous three years. Advanced Micro Devices fell 17.3%, while CoreWeave, a cloud provider for AI chips, dropped 9.8%. GE Vernova, which supplies power equipment for data centers, sank 7.5%. Because these companies are large, their price movements heavily influence the broader index. A 1% change in Nvidia's stock price impacts the S&P 500 more than a similar move in nearly any other U.S. company.

Not all stocks followed the decline. AppLovin jumped 31% after reporting revenue and profit that exceeded analyst expectations. The company's board approved a share buyback program of up to $3.2 billion, increasing the total potential value of the program to $3.6 billion. Tapestry, the parent company of Coach and Kate Spade, rose 7.1% after beating profit forecasts and raising its revenue outlook for the fiscal year.

Global markets felt the impact as well. South Korea's Kospi index tumbled 5.3%, and Japan's Nikkei 225 fell 1.8%. In Europe, London's FTSE 100 dipped 0.4% after the Bank of England raised its main interest rate for the first time in three years. Bank Governor Andrew Bailey stated that future interest rate decisions will depend largely on the resolution of the war in Iran. He noted that resolving the conflict in the Middle East would be the best outcome for the economy. Brent crude oil prices rose 3.9% to $98.29, recovering from a nearly 9% drop the previous day. In the bond market, the yield on the 10-year Treasury fell to 4.84%, down from 4.90% on Wednesday. Investors appear to be moving into U.S. Treasuries for safety as stock prices fall. This shift occurred despite reports that fewer U.S. workers applied for unemployment benefits last week and that summer productivity growth exceeded economic forecasts.