Nasdaq 100 sheds 5% as AI jitters and a blue midterm wave spook investors

For tech investors, Thursday was a bloodbath. The tech-heavy Nasdaq 100 sank 5% in mid-morning trading, landing at its lowest level in five months. The broader Nasdaq Composite slid into correction territory, the term for a drop of at least 10% from a recent high.

Two lackluster earnings reports did the first damage. Chipmakers Qualcomm and Arm Holdings reported Wednesday night, and investors didn't like what they saw. Qualcomm tumbled 9%, while Arm Holdings slipped around 15%, leading the Nasdaq indexes lower in early trading.

The pain spread well beyond those two. Nvidia, the most important supplier to any AI firm, sold off 7% — its largest one-day decline since April 2025 — and has now tanked 15% over the past three months. The S&P 500 fell nearly 3%, memory and chip names SanDisk, Western Digital, AMD, Seagate and Micron all plunged around 10%, and the Dow Jones Industrial Average dropped nearly 700 points. Dow components Cisco and Caterpillar, both major AI data center suppliers, each fell about 5%.

Politics poured fuel on the fire. Tuesday's midterm elections delivered commanding Democratic victories across the country, and numerous Democrats who won governor, attorney general, Senate and House races have pledged to slow or halt construction of AI data centers. Texas, Ohio, Michigan and Georgia drew particular concern, since all four are major data center markets.

Elon Musk felt the sting hardest. SpaceX and Tesla each slid around 10%, largely a reaction to the midterm results. Musk — the world's first trillionaire — donated hundreds of millions to help elect Republican candidates, and until Tuesday's rout was viewed as one of the biggest potential winners from a GOP sweep. Now he and his companies face the prospect of tighter regulation and even potential investigations at the state and federal levels.

The bigger question hanging over the market is whether AI can deliver. Tech stocks have soared in recent years as AI excitement fueled billions in spending on chips and infrastructure, and the Nasdaq has surged almost 40% since Election Day 2024. But doubts about whether the technology can generate the productivity needed to justify those investments have grown louder in recent months, and mixed earnings reports keep rattling investors because of the hundreds of billions of dollars pouring into the sector.