AI stock sell-off drags U.S. markets to worst day since April 2025

The S&P 500 index fell 4.4% on Thursday, marking its steepest single-day decline since April 2025. This sharp drop erased the market's previous day's gain, which had been its best performance in three months. The sell-off was driven primarily by stocks tied to artificial intelligence infrastructure.

Investors are increasingly worried that the construction of new AI data centers may slow down. High borrowing costs have made these massive projects more expensive to finance. Additionally, critics argue that AI stock prices rose too quickly and are now in a bubble. These concerns triggered a broad retreat from tech-heavy portfolios.

Tuesday's U.S. midterm elections added a new layer of uncertainty to the market. Democrats won key seats nationwide, raising the possibility that future government policies could pause data center construction. Voters across the political spectrum have expressed concern about AI's impact on power bills. Any halt to construction would reduce demand for AI chips, electricity, and related services that currently drive much of the U.S. economic growth.

Nvidia, the chipmaker that became the symbol of the AI boom, fell 9.3% on Thursday. It was the heaviest drag on the S&P 500. The company's stock is now down 2.6% for the year, following annual gains of 39%, 171%, and 239% in the three previous years. Advanced Micro Devices dropped 17.3%, while CoreWeave, a cloud computing firm, fell 9.8%. GE Vernova, a supplier of data center power equipment, sank 7.5%.

The Nasdaq composite index tumbled 5.5%, or 1,421.52 points, to close at 24,315.00. The Dow Jones Industrial Average lost 1,833.06 points, or 3.4%, to end at 51,523.06. The S&P 500 dropped 334.89 points to 7,353.73. The Nasdaq is now 11.9% below its all-time high set last month, a decline that market analysts classify as a correction.

Global markets felt the pressure from the U.S. sell-off. South Korea's Kospi index tumbled 5.3%, and Japan's Nikkei 225 sank 1.8% as tech stocks fell. In Europe, London's FTSE 100 dipped 0.4% after the Bank of England raised its main interest rate for the first time in three years. The move aims to limit high inflation, with future rate decisions likely to depend on the outcome of the war with Iran.

In bond markets, the yield on the 10-year Treasury fell to 4.84% from 4.90% late Wednesday. It had stood at 4.95% on election night and above 5.30% last month. The drop in yields suggests investors are moving into U.S. Treasury bonds as a safer asset amid falling stock prices. This trend occurred despite encouraging economic reports, including lower unemployment claims and higher-than-expected summer productivity.

Oil prices rebounded as investors reacted to the midterm election results. Brent crude oil rose 3.9% to $98.29 per barrel, recovering part of its nearly 9% drop from the previous day. Uncertainty remains about the duration of the conflict with Iran and when the global energy industry can return to normal. Bank of England Governor Andrew Bailey noted that resolving the Middle East conflict is the best outcome for limiting inflation.

A few stocks bucked the broader decline. AppLovin, a marketing platform, jumped 31% after reporting revenue and profit that exceeded analyst estimates. The company's board approved a share buyback program worth up to $3.2 billion, bringing the total potential value of the program to $3.6 billion. Tapestry, the parent company of Coach and Kate Spade, rallied 7.1% after delivering stronger profits than expected and raising its fiscal year forecasts.