AI hype fears trigger $2.3 trillion market plunge, Nasdaq 100 drops 6%

Wall Street plunged Thursday as investors fled AI‑related stocks after the U.S. midterm elections sparked fears of a policy shift. The Nasdaq 100 slid more than 6%, its sharpest fall since March 2020, while Nvidia tumbled over 9%, erasing this year’s gains and marking its deepest drop since January 2025. In total, about $2.3 trillion of market value vanished across the board. All 30 Dow Jones components fell, the S&P 500 lost 4.4%, and the Philadelphia Semiconductor Index plunged 12%, its worst day since the pandemic‑era selloff. Momentum‑focused ETFs also suffered, with the iShares MSCI USA Momentum Factor ETF down 8.2%, its steepest decline since 2020. The volatility gauge VIX jumped 11.57 points to 28.18, the highest level since March and the biggest one‑day rise since 2018.

Reaction

Greg Taylor, chief investment officer at PenderFund Capital Management, likened the scene to the 2008 and 2001 bubbles, saying the market was overly concentrated on AI and needed a correction. Michael O'Rourke of JonesTrading Institutional Services warned that earnings forecasts assumed a supportive policy environment that may now be changing. Marta Norton of Empower said she is being more cautious, sticking only to fundamentally strong, cheap‑valued firms. Michael Monaghan of Founder ETFs described a “buyer’s strike” as long‑only funds stayed out while smaller “pod shops” forced a rapid unwind. Eric Diton of The Wealth Alliance is trimming AI exposure and buying energy stocks as a hedge against higher oil prices.

Context

The selloff reflects investor anxiety that a Democratic win could curb the rapid build‑out of data‑centres that power AI models, potentially slowing the sector that has lifted many tech stocks this year. This market reaction follows two days of volatility after the midterms, where initial optimism turned into concern over policy and spending shifts.