Technology stocks experienced their steepest decline in recent months on Thursday, November 5, as market participants retreated from semiconductor manufacturers, cloud infrastructure providers and energy suppliers that have anchored gains throughout the year. The S&P 500 index fell 4.4% to finish at 7,353.73, marking its most significant single-day drop since April 2025's "Liberation Day" tariff announcement, per the Associated Press. This pullback erased all index gains accumulated following the midterm elections.
The reversal came just one day after the Dow Jones Industrial Average posted its strongest post-midterm performance since 1982, gaining 3%. On Thursday, however, the Dow shed 1,833 points, or 3.4%, while the Nasdaq Composite fell 5.5% to 24,315. The technology-focused index now sits 11.9% below its October peak, entering correction territory—defined as a decline exceeding 10% from a recent high.
The Nasdaq-100, encompassing many of the world's largest technology firms, dropped 6.4%, erasing approximately $2.3 trillion in market capitalization. Companies directly tied to the artificial intelligence infrastructure expansion suffered the heaviest losses.
Nvidia fell 9.3%, becoming the single largest weight on the S&P 500 and leaving its annual return at negative 2.6%, merely five weeks after reaching a peak valuation near $5.7 trillion. Advanced Micro Devices declined 17.3%, while CoreWeave, which leases computing resources to AI-focused enterprises, dropped 9.8%. GE Vernova, a supplier of electrical equipment for data centre operations, fell 7.5%.
Losses extended to major corporations investing substantially in AI infrastructure. Microsoft, Meta, Amazon and Alphabet each declined between 2% and 4%.
Market turbulence reached levels not seen in over two years, as measured by the Cboe Volatility Index. The VIX surged more than 65% during trading, reaching 27.45 and marking its largest single-day jump in more than two years.
Few sectors offered refuge. AppLovin, an advertising technology firm, gained 31% following earnings that surpassed analyst expectations.
Economic indicators released Thursday provided some reassurance. Jobless claims fell while summer productivity expanded beyond economist forecasts. The 10-year Treasury yield declined from 4.90% to 4.84%, indicating capital flows toward government securities.
Market focus, however, concentrated on a different concern: the political trajectory of data centre expansion.
Election results reshape data centre policy landscape
The midterm outcomes introduced fresh uncertainty for an industry reliant on constructing additional facilities, expanding electrical capacity and obtaining approvals from local and state authorities.
Democrats secured majorities in both congressional chambers and won multiple governorships in states hosting significant data centre concentrations. Their electoral success coincided with mounting grassroots opposition to new installations.
The underlying issue proves straightforward: data centres consume substantial quantities of electricity, physical space and water. Construction activities strain local electrical infrastructure, prompting debate over responsibility for necessary upgrades.
In areas where residents oppose new developments, elected officials increasingly incorporated data centre restrictions into campaign platforms.
Voter sentiment appears to have shifted decisively. An NBC exit poll found nearly 60% identified data centres as crucial or significant in their voting decision. Approximately 80% opposed hosting a facility in their communities.
Local ballot measures demonstrate that opposition translates into tangible political outcomes. According to Redbud Consulting data cited by the Associated Press, restrictions passed in 44 of 45 completed data centre referendums spanning 12 states.
Gubernatorial contests reflected comparable patterns. Of 34 races decided by the Associated Press, 32 went to candidates advocating stricter rules or limitations on data centres.
The Data Center Watch tracking initiative identified 12 candidates who championed complete bans or temporary freezes on new construction.
For market participants, this situation creates a material challenge. Regardless of sustained demand for computing resources, companies may encounter greater obstacles or elevated costs when building required infrastructure.
Texas and Ohio emerge as critical focal points
Texas holds particular significance due to its outsized share of planned data centre expansion. The state represents 27% of projected US data centre capacity, according to Wells Fargo analysis cited by CNBC.
Democrat Gina Hinojosa defeated Governor Greg Abbott by campaigning against data centre projects she characterized as contrary to Texan interests or approved without adequate community consultation.
Morgan Stanley's research team identified her victory as the most consequential election outcome for data centre development.
Ohio similarly produced consequences for industry expansion strategies. In one county where Meta had proposed a roughly 65,000 square metre facility, voters enacted a prohibition on large data centres.
Democrat Amy Acton's election as Ohio governor introduces additional complexity. Morgan Stanley flagged her victory as creating substantial risk of construction delays.
Goldman Sachs cautioned that Democratic electoral gains could postpone projects in Georgia and Texas.
These dynamics extend beyond individual states. At the national level, legislators have already proposed curbs on data centre development.
Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez introduced legislation earlier this year establishing a nationwide freeze on new data centres pending congressional adoption of standards addressing electricity expenses, environmental consequences and community consent.
The proposal encountered resistance from lawmakers across party lines upon introduction. Presidential signature would be required for enactment, presenting a substantial hurdle given President Donald Trump's vocal backing of the sector.
A more targeted proposal could prove more consequential for operators. Senator Martin Heinrich's GRID Savings Act would prohibit utilities from shifting grid modernization expenses to local populations.
States retain more immediate authority over licensing, utility governance and tax policies.
New York enacted the nation's first data centre moratorium in July, a decision Trump characterized as "terrible".
Wisconsin governor-elect David Crowley has expressed support for a moratorium and indicated intentions to eliminate the state's sales tax exemption benefiting data centre operators and developers.
Capital spending uncertainty compounds investor concerns
Political headwinds represent only one dimension of the pressure on AI-related equities.
The market decline also followed late-October earnings announcements that prompted reassessment of spending trajectories among leading technology corporations. Microsoft and Alphabet both disclosed quarterly capital expenditures falling short of analyst projections on October 28. Microsoft additionally reduced its annual spending guidance to $170 billion from $175 billion.
Alphabet maintained its forecast spanning $195 billion to $205 billion. Meta, conversely, raised its spending floor to $135 billion and reported negative free cash flow during the quarter.
These expenditure levels matter significantly because the AI infrastructure expansion depends on a concentrated group of corporations allocating massive resources toward data centres, semiconductors and computing infrastructure.
Reduced investment by these firms could cascade throughout the supply chain, affecting semiconductor producers, cloud service providers and electrical equipment manufacturers.
Market participants simultaneously reassessed their appetite for maintaining positions in the year's strongest performers.
Charlie McElligott, a Nomura strategist quoted by Yahoo Finance, attributed substantial Thursday selling to hedge funds realizing profits on top-performing holdings ahead of year-end rather than responding to deteriorating fundamentals.
Retail investors participated in the selloff as well. By mid-afternoon Thursday, individual traders had become net sellers of approximately $358 million in US equities, representing their largest net selling activity since March 2020, per Vanda Research.
The immediate market reaction may not forecast the ultimate impact of election outcomes on the AI sector.
Early Friday trading showed Nasdaq-100 futures advancing roughly 0.7%, while Dow futures declined approximately 1%, suggesting a mixed opening as traders awaited the September jobs report.
The genuine test arrives next year, when newly elected officials assume positions and translate campaign commitments into legislation.
For the AI sector, the central question has evolved. Rather than focusing solely on affordability of construction or sustained demand for processing capacity, the industry now confronts whether facilities will receive permission, where they may operate, and who bears responsibility for electricity and infrastructure expenses.
The artificial intelligence expansion continues unabated, yet the market shift signals growing investor apprehension regarding infrastructure construction risks, following a year concentrated on expansion prospects.
Source: The Next Web
