US stocks lose $3.2 trillion as Democratic midterm sweep fuels AI selloff

US stocks lost $3.2 trillion on Thursday after Democrats' sweeping victory in Tuesday's midterm elections disrupted Wall Street's expectations for AI spending. The decline in the S&P 1500 Composite's market value ranked among the largest since the millennium began. Investors sold AI-related shares amid fears that the Democratic victory over Donald Trump's Republicans would slow the AI spending boom. That boom has helped lift Wall Street to record levels this year.

The technology-heavy Nasdaq 100 declined 6.4%. The S&P 500 fell 4.4%, recording the benchmark's worst session since April 2025 amid sharp intraday swings. Nvidia shares dropped 9.3%, reducing the chipmaker's market value by more than $400 billion. Qualcomm shares declined 9.5%. Broadcom shares lost 10%. Micron shares fell 17%. Sandisk shares dropped 22%. Western Digital shares declined 17%. Sandisk and Western Digital, both memory stocks, had ranked among this year's strongest market performers.

Investors fear that newly elected politicians who opposed data centres during their campaigns will slow AI infrastructure development. Such a slowdown would disrupt expectations for enormous expenditure on chips, servers and facilities. Adam Crisafulli, president of research firm Vital Knowledge, said investors were abandoning positions and selling without discrimination. SYZ Group chief investment officer Charles-Henry Monchau said the Democratic sweep had left investors fearing that AI capital spending had already peaked. One hedge fund portfolio manager said the selling appeared to reflect de-grossing, a process in which fast-money investors reduce large positions. Another hedge fund executive said the speed of the day's decline was beginning to alarm investors. A New York brokerage chief executive said investors who would ordinarily buy at depressed prices were instead holding cash.

Amundi investment chief Vincent Mortier said gains in US stocks the day after Democrats secured control of Congress had proved short-lived. Mortier said technology shares were being repriced sharply and rapidly as the new political landscape revived concerns about opposition to data centres and new regulation. Michigan Democratic senator-elect Abdul El-Sayed has advocated a "full-on pause" in frontier development. El-Sayed argued that technological progress was moving faster than safety measures. Incoming South Carolina senator Annie Andrews proposed banning new data centre construction for two years to protect communities from extremely wealthy and powerful companies.

A US portfolio manager with large technology holdings, including Anthropic, described Democrats' congressional victory as "a horrible day for America". The portfolio manager said the election results would have major consequences for AI-server chip prices, prospective initial public offerings and AI data centre companies. Several Big Tech leaders spent substantial amounts supporting Trump's Republicans in the elections. Republicans have sought to reduce regulation of the AI industry.

Tesla and SpaceX, Elon Musk's companies, suffered further declines. Both companies are based in Texas, where Democrats won the governorship and the party's first Senate seat in more than 30 years. Tesla shares fell 10.8% on Thursday. Tesla had lost 3.3% on Wednesday. SpaceX shares declined 9.1% on Thursday. SpaceX had fallen 3.8% the day before.