Chip stocks steady Nasdaq after AI regulation rout

The Nasdaq Composite fell 5.52% on Thursday, Nov. 5, and closed more than 10% below its Oct. 6 record, which put it in correction territory. Investors worried that Democrats' midterm gains could slow the AI data center buildout, and the selloff erased roughly $2.5 trillion in market value, CNN reported. It was the index's worst day since April 2025, when President Donald Trump announced sweeping tariffs. The S&P 500 ↗ 0.31% and the Dow Jones Industrial Average also had their worst sessions since then. The Dow closed 1,833 points lower, which wiped out all of Wednesday's 1,569-point post-election rally.cnn.com

Chipmakers lead the rout

Semiconductor and "neocloud" stocks fell the most. The Philadelphia Semiconductor Index PHLX Semiconductor Index ↗ 3.91% dropped 12%, Nvidia ↗ 2.78% fell 9% and Advanced Micro Devices ↗ 11.04% slumped 17%, Reuters reported via The Straits Times. The Nasdaq 100 fell 6.4%, and Reuters said it lost $2.5 trillion in market value. CoreWeave ↗ 6.28% dropped 10% and Nebius ↗ 7.58% lost 15%. The S&P 500 fell more than 4% and the small-cap Russell 2000 also closed in correction. The VIX jumped about 70%, its biggest one-day rise in almost two years, and all 11 S&P 500 sectors finished lower.cnbc.com+2

The Democratic win in the Texas governor's race was a major factor. Governor-elect Gina Hinojosa campaigned on a temporary moratorium on data centers in a state that has drawn huge AI investment. UBS analysts estimated that about 30% of expected US data center capacity additions in 2028 could be at risk from construction pauses. "The market's moving from the promise of AI to the price of AI," said Ted Parkhill of Incline Investment Management.straitstimes.com+1

Global spillover and a partial rebound

The selloff spread to Asia on Friday. Stock markets in Tokyo and Seoul ended the week down 6%, AFP reported, and Japan's Nikkei 225 had its worst week since 2020. On Wall Street, chip stocks recovered some ground in Friday trading. The Nasdaq moved higher while the Dow slipped further. Nvidia gained in premarket trading after its worst day since January 2025.miamiherald.com+2

Bubble or buying opportunity

Some strategists say the drop was an overreaction. "We view Thursday's selloff as reactionary, not a fundamental reset," said Jane Gibbons of Jefferies. Ed Yardeni welcomed a cooling of the AI trade. "It's better to let air come out of the AI bubble than let it burst," he told CNN. Briefing.com's Patrick O'Hare was less certain. "The market is hoping to hit a reset button today, yet the path ahead is anything but clear," he said.finance.yahoo.com+2