US stocks tumbled on Thursday, with the Nasdaq Composite falling more than 3% as investors continued to dump technology shares, particularly chipmakers and companies linked to the artificial intelligence (AI) infrastructure boom as fears rose over midterm-victorious Democrats curtailing the AI-data center boom.

The tech-heavy Nasdaq Composite declined 3.3%, while the S&P 500 dropped 1.9%. The Dow Jones Industrial Average fell 489 points, or 0.9%, as losses across technology stocks overshadowed gains in select blue-chip companies. The Nasdaq 100 crashed more than 5% in a single day.

The selloff in semiconductor and data centre-related stocks intensified for a second consecutive session, reversing much of the optimism generated by Wednesday's broad-based market rally following Democrats' sweeping midterm election victories, Reuters reported.

The Philadelphia Semiconductor Index (SOX) plunged as much as 10.22%, with heavyweights including Nvidia, Advanced Micro Devices (AMD), Intel and Marvell Technology leading the declines.

Among the biggest losers, Tesla shares tumbled 9.5%, while SpaceX slipped 6.7%, Meta 6.6% and SpaceX 9.6% extending their recent losses.

The weakness extended across the AI infrastructure ecosystem. Data centre operators IREN, Hut 8 and Applied Digital fell between 6% and 11%, while cloud computing companies CoreWeave and Nebius Group declined 9.3% and 13.4%, respectively.

Utilities and equipment suppliers that have benefited from the rapid expansion of data centres, including GE Vernova and Constellation Energy, also traded lower.

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The broader technology sector remained under pressure, with Amazon and Alphabet edging lower. Oracle shares also declined close to 5%.

Qualcomm plunged 9% after its fourth-quarter smartphone chip sales outlook fell short of Wall Street expectations, reflecting sluggish demand and weakness in Apple-related revenue, Reuters reported.

AI trade faces fresh headwinds

The latest selloff comes amid concerns that Democrats' sweeping midterm election victory could translate into greater regulatory scrutiny of the artificial intelligence industry and its rapidly expanding data centre infrastructure, according to Reuters.

Investors are particularly concerned about the potential implications of Democratic victories in key states where public opposition to the industry's growing electricity consumption, land requirements and data centre expansion has been increasing.

The political uncertainty has weighed on companies directly exposed to the AI infrastructure investment cycle, including semiconductor manufacturers, data centre operators and cloud computing providers.

Tesla and SpaceX's declines also come against the backdrop of Elon Musk's substantial financial backing of Republican candidates during the election campaign, including efforts to retain Republican control in Texas, the home state of both companies, Reuters reported.

Wednesday's rally gives way to Thursday's selloff

Thursday's losses followed a powerful rally on Wednesday, when investors responded to Democrats securing comfortable majorities in both chambers of Congress and winning key gubernatorial races.

The Dow surged more than 1,500 points, marking its best single-day performance since April 2025. The S&P 500 and Nasdaq Composite also advanced more than 1% each.

However, Thursday's sharp reversal highlighted the fragility of the previous session's optimism, with investors shifting their focus back to risks surrounding the AI investment boom and the technology sector's valuations.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here