Nasdaq Suffers Biggest Daily Fall Since April 2025 as AI Infrastructure Selloff Deepens

The Nasdaq Composite suffered its steepest one-day decline since the April 2025 market selloff known as Liberation Day, losing 5.5% as investors reassessed the outlook for artificial intelligence infrastructure following sweeping Democratic victories in the US midterm elections.

The selloff wiped trillions of dollars from technology stocks, with semiconductor manufacturers, data center operators and companies supplying computing capacity bearing the heaviest losses. Investors are increasingly concerned that the election results could lead to tighter scrutiny of data center construction, delaying projects that underpin the industry's expansion.

The Nasdaq's decline also exposed the vulnerability of smaller AI infrastructure companies already facing higher borrowing costs and tighter financing conditions. Firms that depend on continuous access to debt and equity markets to fund expensive computing assets could face additional pressure if construction approvals slow or investor appetite weakens.

The Nasdaq Composite fell for a second consecutive session as the previously buoyant AI trade came under greater scrutiny. It was the fifth time since mid-October that the index had dropped by more than 500 points.

"The big election outcome was, especially with the Democrats winning a lot of the governorships, that the slowdown of the data center buildout is the real key theme that's going to stick," said Michael O'Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

The index has now entered correction territory, having fallen nearly 12% from its record closing level on October 6. A correction is generally defined as a decline of at least 10% from a recent peak.

The Nasdaq 100, which tracks the largest companies listed on the exchange, dropped 6.4%, erasing approximately $2.5 trillion in market value. The Cboe Volatility Index, Wall Street's main gauge of expected market volatility, recorded its largest daily increase since December 2024.

The scale of the decline raised concerns about further selling in global markets. Japan's Nikkei and South Korea's Kospi, both of which had gained more than 20% this year, fell significantly after Wednesday's losses in data center-related shares.

The election results have introduced another source of uncertainty for an industry whose growth depends on the rapid construction of power-intensive data centers. Local opposition to new facilities has increased as communities raise concerns about electricity costs, pressure on power grids, water consumption and the distribution of economic benefits.

Investors are now considering whether political resistance could delay projects that have already attracted billions of dollars in planned investment.

"There's going to be a lot of pushback about those data centers being geographically located in someone's backyard, straining the power grid, straining the water systems," said Bruce Zaro, managing director at Granite Wealth Management in Plymouth, Massachusetts.

"Although there are a number of data centers already approved, there are still a lot to be permitted. There's going to be a difficult road to get those permitted forthcoming," he added.

UBS analysts estimated that around 30% of expected US data center capacity additions in 2028 could be at risk from potential construction pauses. Such delays would affect an industry whose investment model relies on bringing new computing capacity online quickly to meet demand from AI developers and cloud customers.

The political uncertainty is adding to existing concerns about whether the enormous investments in AI infrastructure will generate sufficient returns. Technology companies have committed substantial sums to chips, servers, power supply and data center construction, while investors are increasingly demanding evidence that the spending can translate into sustainable revenue and profits.

The latest market reaction indicates that infrastructure growth is no longer being treated as an unquestioned driver of AI-related valuations. The ability to finance projects, secure electricity and obtain construction approvals is becoming as important to investors as demand for computing capacity.

Hyperscalers that had initially resisted the AI selloff also came under pressure. Amazon and Alphabet each fell 2.2%, while Microsoft declined 3.6%. Bloomberg News reported that Microsoft was tightening oversight of some data center projects involving Nebius, IREN and Nscale.

Semiconductor and Neocloud Stocks Lead Losses

The Philadelphia Semiconductor Index fell 12%, touching its lowest level in more than six months. Nvidia shares dropped 9%, while Advanced Micro Devices slumped 17%, extending losses across companies closely tied to AI computing demand.

Data center operators and specialist cloud providers suffered even sharper declines. CoreWeave fell 10%, while Nebius dropped 15%. Shares in both companies have lost half or more of their value since the Nasdaq reached its record on October 6.

CoreWeave has become a closely watched indicator of investor confidence in the financing model supporting AI infrastructure. The company's business relies on substantial capital investment in computing equipment and data centers, making it particularly sensitive to borrowing costs and changes in investor appetite.

The market's concerns were also visible in its credit default swaps, financial contracts that provide protection against a borrower failing to meet its debt obligations. CoreWeave's five-year CDS spreads widened to a record 1,267.9 basis points, according to S&P Global Market Intelligence data. Intel's five-year CDS spreads also reached a record 149.7 basis points.

"The market's moving from the promise of AI to the price of AI," said Ted Parkhill, founder and chief executive of Incline Investment Management.

"There's no question that AI is going to be transformative for the world in the long run. But that doesn't mean every AI-related stock is currently priced appropriately. There's going to be a lot of turmoil," he added.

The weakness extended to companies operating data centers and supplying the infrastructure needed to power them. Applied Digital, Cipher Digital and IREN each fell more than 14%. GE Vernova, which supplies power-generation equipment and services, dropped 7.4%, while Constellation Energy declined 2.5%.

The losses highlight how concerns about data center construction are spreading beyond technology companies to utilities and industrial suppliers that have benefited from expectations of sustained electricity demand.

The market downturn could also affect the timing and reception of major AI listings. Some analysts questioned whether the selloff might influence the planned autumn initial public offering of Anthropic. A delay or weaker investor appetite for the listing could further affect sentiment across private AI companies.

The broader concern is that AI investment is entering a more demanding phase. Companies must now demonstrate that the infrastructure spending can produce adequate returns while navigating financing costs, electricity constraints, and political opposition. The technology's long-term commercial potential remains significant, but investors are becoming less willing to value every company associated with it on growth expectations alone.