This article first appeared on GuruFocus.
The Nasdaq Composite fell 5.5% on Thursday, entering correction territory as concerns about potential restrictions on artificial intelligence infrastructure and post-election policy changes triggered a broad technology selloff.
The decline erased about $2.5 trillion in market value, with investors reassessing the outlook for data center development after Democrats made gains in the U.S. midterm elections. Proposals for temporary data center construction pauses and possible reductions in energy and tax incentives added to concerns about future AI investment.
Semiconductor stocks bore much of the selling pressure. The Philadelphia Semiconductor Index dropped more than 12%, its steepest daily decline since 2020, while Nvidia (NASDAQ:NVDA) slid 9.2%. SanDisk and Western Digital fell 22% and 17%, respectively, as investors reduced exposure to AI-related hardware companies.
The rapid downturn also prompted margin calls and forced selling, contributing to losses across technology shares and other market segments. Hedge funds and retail investors reportedly unwound leveraged positions as the selloff accelerated.
The Nasdaq’s move into correction territory followed a sharp reversal in sentiment toward AI-related investments and infrastructure spending.