NEW YORK — A brutal sell-off swept through Wall Street Thursday, led by stocks tied to the buildout of AI data centres. The wipeout more than erased the U.S. stock market’s gain from the day before, which was its best in three months.
The S&P 500 fell 4.4 per cent for its worst day since President Donald Trump shook markets worldwide in April 2025 with his “Liberation Day” tariffs. The Dow Jones Industrial Average sank 1,833 points, or 3.4 per cent, while the Nasdaq composite tumbled 5.5 per cent.
The Nasdaq, which is full of AI-related and other tech stocks, sank 11.9 per cent below its all-time high set last month. Stock geeks call a loss of more than 10 per cent a “correction.”
Stock markets around the world felt pressure from continued drops for companies that had benefited from the boom in the artificial-intelligence technology industry, and South Korea’s Kospi index tumbled 5.3 per cent. Such stocks have been swinging for months on worries that the construction of further AI data centres may slow because of how expensive it’s become to borrow money. Critics also said AI stock prices had shot too high and were in a bubble.
Tuesday’s U.S. midterm elections added another challenge. The nationwide victories for Democrats raised the possibility that governments could force pauses in construction of more data centres. Voters across political parties say they’re wary about AI and don’t like the increases to power bills caused by data centres.
Any slowdown in construction of AI data centres would mean fewer purchases of AI chips, not to mention electricity and other products and services that are getting vacuumed up in the AI frenzy, which is driving much of the U.S. economy’s growth.
Nvidia, the chip company that quickly became the face of the AI boom, fell 9.3 per cent and was by far the heaviest weight on the S&P 500. It’s now down 2.6 per cent for the year so far following annual gains of roughly 39 per cent, 171 per cent and 239 per cent in the last three years.
Advanced Micro Devices tumbled 17.3 per cent. CoreWeave, a company that rents access to AI chips to customers over the cloud, fell 9.8 per cent. GE Vernova, which has been helping to power data centres, sank 7.5 per cent.
Compounding the pain for investors, AI chip stocks are some of Wall Street’s most influential because they’ve become some of the largest. A 1 per cent move for Nvidia, for example, has more effect on the S&P 500 than a 1 per cent move for nearly any other U.S. stock.
Thursday’s losses were broad after gains for the majority of stocks on Wall Street during the morning quickly evaporated.
Among the handful of winners was AppLovin, which jumped 31 per cent after the marketing platform reported both revenue and profit that topped analysts’ expectations. The company’s board also approved a program to send up to US$3.2 billion to investors by buying back its own stock, bringing the program’s total potential value to US$3.6 billion.
Tapestry rallied 7.1 per cent after the company behind the Coach and Kate Spade brands likewise delivered a stronger profit than expected. It also raised its forecasts for revenue and earnings this fiscal year.
Stock prices tend to follow where corporate profits and interest rates go over the long term, depending on them much more than on who controls what in Washington.
All told, the S&P 500 fell 334.89 points to 7,353.73. The Dow Jones Industrial Average dropped 1,833.06 to 51,523.06, and the Nasdaq composite sank 1,421.52 to 24,315.00.
In other financial markets, the initial knee-jerk reaction to the U.S. midterm election results faded a bit. The price of a barrel of Brent crude oil rose 3.9 per cent to US$98.29 and recovered a chunk of its nearly 9 per cent drop from the day before. Uncertainty still reigns about what will happen in the war with Iran and when the global energy industry can return to normal.
In the bond market, Treasury yields continued to tumble. The yield on the 10-year Treasury fell to 4.84 per cent from 4.90 per cent late Wednesday. It had been at 4.95 per cent on election night and above 5.30 per cent last month. That could be a signal that investors are herding into U.S. Treasury bonds in search of something that’s safer to own as stock prices tumble.
The drop in yields came despite some encouraging reports on the U.S. economy. Fewer U.S. workers applied for unemployment benefits last week. A separate report, meanwhile, suggested overall productivity for U.S. workers improved by more during the summer than economists expected. That could help the economy grow without adding pressure to the nation’s high inflation.
In stock markets abroad, indexes were mixed in Europe and Asia. Besides South Korea, Japan’s Nikkei 225 also felt the sting of drops for tech and AI-related stocks and sank 1.8 per cent.
London’s FTSE 100 dipped 0.4 per cent after the Bank of England increased its main interest rate for the first time in three years to help limit high inflation.
The bank said its next moves on interest rates will largely hinge on what happens with the Iran war, which sent oil prices and inflation higher worldwide.
“We’ve seen encouraging news in the past 48 hours,” Bank Gov. Andrew Bailey said at a press briefing. “The best thing that can happen is to resolve the conflict in the Middle East; there’s no question about it.”
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Stan Choe, The Associated Press
AP Business Writer Elaine Kurtenbach contributed to this report
