Democratic Midterm Sweep Triggers $3.2 Trillion AI Selloff, Worst Tech Rout Since 2020

A Democratic Party sweep in the US midterm elections sparked one of the most violent selloffs in technology stocks in years, with investors fearing that newly empowered Democrats would impose restrictions on AI data center construction and tighten regulatory oversight of the broader AI industry. On Thursday, November 5, the Nasdaq 100 plunged 6.36% to 26,629.81, its steepest single-day drop in six years, while the S&P 500 fell 4.36% and the Dow Jones Industrial Average lost 3.44%. AI-related stocks shed roughly $3.2 trillion in market value, the worst rout since the pandemic crash of 2020, and the QQQ recorded its heaviest single-day volume on record.

Semiconductor stocks bore the brunt of the damage. The Philadelphia Semiconductor Index lost 12.2% on Thursday. Nvidia fell 9.3%, erasing its entire year-to-date gain for 2026. AMD and Micron each cratered more than 17%, SanDisk tumbled 22.3%, Broadcom slid 10%, and CoreWeave dropped 10%. Nine of the world's wealthiest technology figures lost a combined $152 billion in a single session, with Elon Musk alone accounting for roughly $80 billion of that figure. The VIX one-day gauge surged to nearly 38, its highest reading since April 2025, implying about a 2.2% daily swing in the S&P 500.

The rout spread rapidly to Asia and Europe on Friday. Japan's Nikkei 225 closed down 5.96% at 57,434, more than 20% below its June peak and firmly in bear-market territory. South Korea's Kospi plunged over 8.8%, triggering a trading halt, and Taiwan's benchmark fell roughly 9%, with both Japan and Taiwan confirming bear markets. SoftBank, already down 59% since early June after adding $40.4 billion in debt over 12 months to fund AI investments including a $64 billion stake in OpenAI, fell a further 10.8% on Friday as its credit-default swaps rose and bond prices fell. Arm shares have plunged 51% since June 30, weakening SoftBank's asset base. In Europe, the FTSE 100 tumbled 2% and broader European indexes fell across the board, while investors rotated into bonds and the dollar. Bitcoin dropped to $75,000, wiping $150 billion from crypto markets.

Structural cracks in AI financing added to the pressure. ING placed roughly $500 million of data center loans up for sale, comprising 12 facilities including a $25 million piece of the OpenAI-SoftBank-Oracle Stargate site in New Mexico. Oracle separately issued a force majeure notice to the Stargate developer, a legal step that could excuse it from project obligations. Susquehanna warned that in a worst-case scenario, 8% of planned AI data center capacity, representing 148 gigawatts, could be canceled. Apollo analysts argued that AI spending is increasingly perceived as a cost rather than a growth driver, a framing that threatens valuations across the sector. The tech sector's six-day relative loss was described by one analyst as the worst since the dot-com bust.

Debate over valuations sharpened as the dust settled. The Kobeissi Letter argued Nvidia was cheap at a forward price-to-earnings ratio of approximately 13 times, well below the S&P 500's roughly 20 times and less than a third of Walmart's 43 times multiple. Critics countered that roughly 70% of Nvidia's revenue is concentrated among five hyperscalers, making earnings estimates fragile if capital spending slows or cheaper hardware alternatives emerge. Michael Burry raised doubts about Anthropic's $1.5 trillion IPO valuation ambition, questioning whether its major partners, Amazon, Alphabet, and Microsoft, are helping present its financials favorably ahead of a listing.

India stood out as the sole major market to escape the carnage. The Nifty hit a three-month high and was on track for its best week since 2021, drawing $1.6 billion in foreign inflows in a single day, with analysts noting the country has near-zero direct exposure to AI infrastructure. By Friday premarket in the US, chip stocks staged a partial recovery: Micron gained 9.2%, AMD rose 8.3%, Arm climbed 7.4%, Intel added 6.2%, Nvidia advanced 5%, and the iShares Semiconductor ETF rose nearly 5.9%. UBS strategist Gerry Fowler cautioned that the rebound could be misleading, noting that trend-following quant funds remain heavily long equities and may need to reduce exposure further. Mira Murati's Thinking Machines Lab was separately reported to be nearing a $5 billion funding round led by Accel at a $40 billion pre-money valuation, up from roughly $12 billion after its seed round.