It may have been Blue Tsunami on Tuesday but it was a sea of red that washed over tech stocks on Thursday, covering everything from chips and datacenter companies to software and gig economy firms, as investors panicked that the U.S. midterm election results will bring the AI boom to a premature halt, or at least, a significant slowdown.
The tech-heavy Nasdaq was down more than 1,340 points, or 5.2% in midday trading, shedding more than $3 trillion in market cap, and representing its biggest daily drop since the Liberation Day tariff announcement in April 2025, according to Bloomberg data. The Philadelphia Semiconductor Sector index, which tracks the 30 largest companies in the chips business, was down more than 1,000 points—on track for its single biggest day loss since March 2020.
Some of the biggest names in tech took it on the chin, with Facebook parent company Meta down 3.4%, Microsoft down 2.8%, and Nvidia down 8%.
Thursday’s selloff dragged down the entire market, marking a sharp reversal from Wednesday, when shares rallied following the Democrats’ retaking of the Senate and House of Representatives in the midterm elections. Voters overwhelmingly approved candidates and ballot measures that sought to curtail the buildout of AI data centers in the U.S.
That reality seems to have hit tech stock investors more forcefully on Thursday, as some early signs of the changing business conditions came into focus.
Meta President Dina Powell McCormick, speaking at a conference organized by the Wall Street Journal on Wednesday, acknowledged the new hurdles. Building data centers in the U.S. is “going to be harder,” she said. “I can also tell you that every hyperscaler is now thinking about ‘Do we need to build outside the United States?’ Because they’re enormous investments, hedging those investments is a wise thing to do.”
Dan Ives, the usually bullish analyst at Yorkville Ives, wrote in a note to investors Thursday that he now expects the tech industry’s capex growth to peak next year, instead of in 2028 or 2029.
That capex spree has been an engine of the U.S. economy over the past two years as companies such as Alphabet, Microsoft, Amazon, Meta, and Oracle, as well as new so-called neocloud companies, raced to build data centers to run AI services. The companies are spending hundreds of billions of dollars for the chips, computers, and networking gear, in addition to land, energy, and construction, to erect the data centers.
“While Big Tech and hyperscaler capex should still easily exceed $1 trillion in 2027 the growth rate into 2028 will clearly moderate significantly as the data center buildout comes at a much slower pace given the political map especially in the state of Texas,” Ives wrote.
“We estimate on the low end 10% of the planned 800-1,000 AI focused data centers in the US will now be wiped off the roadmap, with potentially up to 20% of these facing a much longer regulatory road that could further impact the capacity buildout in the US over the next few years,” Ives wrote.
Chip stocks were some of the worst hit, with Micron, the one of the world’s top 3 makers of memory chips, down roughly 14% and AMD, a rival to Nvidia, also down 14%.
Simeon Wallis, chief investment officer at Aprio Wealth Management, told Fortune that uncertainty around data center expansion in Texas, Georgia, and Ohio is leading to worries about AI industry growth. “We see that uncertainty reflected disproportionately in semiconductors, an industry that has been a major beneficiary of AI infrastructure investment,” said Wallis, whose firm manages $6.1 billion in assets.
Neocloud companies, which have taken on large amounts of debt to build data centers that compete with the likes of Amazon and Google, were particularly hard hit as well. Coreweave, one of the leading neocloud companies, was down 9% on Thursday, and on track for an 18% decline over the past two days.
By contrast, Google, one of the industry’s largest cloud providers, with a search advertising business powering its business, was down a more modest 1.6% on Thursday.
The turmoil triggered by data center worries spread across the broader tech sector throughout Thursday. Software stocks like Salesforce and Snowflake were down 3.6% and 6.4% respectively. Figma, a maker of design software which reported stronger than expected Q3 revenue on Wednesday, was down 17%.
Even gig economy and streaming media companies like DoorDash, Uber, Spotify, and Netflix were all down by multiple percentage points by the time the market closed Thursday.
“Ultimately, we believe that markets can over-react in the short term to speculating who future winners and losers are,” said Wallis, of Aprio Wealth Management.
With additional reporting by Scott DeCarlo and Catherina Gioino.
This story was originally featured on Fortune.com