AI Stocks Crash After the Midterms: What Happened and What to Watch Next

The short answer

On Thursday, November 5, 2026, AI and chip stocks crashed after the midterm elections. The Nasdaq Composite fell about 5.5% into correction territory, the Nasdaq 100 fell 6.3% and lost about $2.3 trillion in value, the S&P 500 fell about 4.4%, the Dow fell 1,833 points, and chip stocks had their worst day since March 2020. Nvidia fell about 9.2%, while AMD and Micron each fell about 17%.

The main drivers were fears that newly elected officials will restrict AI and data centers, doubts about whether AI spending will pay off, and profit-taking. Stocks partly rebounded on Friday after a strong jobs report, but the S&P 500 still had its worst week since June.

Hey everyone,

This was one of the wildest weeks in the market in years. On Wednesday, stocks rallied after the midterm elections. On Thursday, AI stocks fell off a cliff: the Nasdaq dropped more than 5% in a single day, chip stocks had their worst day since March 2020, and trillions of dollars in market value disappeared. On Friday, things calmed down a bit. In this post I'll walk through what happened, which stocks were hit hardest, why it happened, and how I'm thinking about it. I'll flag clearly where I'm sharing my own opinion. Everything here is for education, not advice.

A quick note up front: this was written on Friday, November 6, right after the market closed. Some numbers differ slightly between news outlets, so I've used the most widely reported figures and rounded where sources disagree.

What happened to AI stocks this week?

The big move came on Thursday, November 5. According to NBC News and Yahoo Finance, here is how the major indexes closed:

• Nasdaq Composite: down about 5.5%, to roughly 24,315, putting it in correction territory (10% or more below its high).
• Nasdaq 100: down 6.3%, erasing about $2.3 trillion in market value.
• S&P 500: down about 4.4%, to roughly 7,354. NBC News estimated it lost about $2.8 trillion in value.
• Dow Jones Industrial Average: down 1,833 points, or 3.4%, to about 51,523.
• Philadelphia Semiconductor Index: down about 12.3%, its worst day since March 2020.

For context, that came just one day after the Dow jumped about 3% on Wednesday, which I covered in my midterm elections post. The mood flipped from relief to fear in about 24 hours. Yahoo Finance reported that the S&P 500 finished with its worst week since June, and the big technology sector fund (XLK) fell about 7% for the week.

Which stocks fell the most?

The damage was heaviest in the companies most tied to the AI buildout: chips, memory, and data center hardware. NBC News reported these Thursday moves:

• Nvidia: down about 9.2%, the biggest single drag on the Dow.
• AMD and Micron: each down about 17%.
• Sandisk: down about 22%, with Western Digital down about 17% and Seagate down about 16%.
• Arm and Qualcomm: down about 13% and 9.5%, after both reported earnings Wednesday night.
• Tesla and SpaceX: each down nearly 10%. NBC News said the two had lost more than $400 billion in combined value since the election.

Software and security names were hit too. Yahoo Finance reported that Palantir and CrowdStrike were each down more than 10% at their lows. Interestingly, the biggest platform companies, Alphabet, Meta, Amazon, and Microsoft, also fell but held up better than the market overall, according to NBC News.

The memory names are the ones I discussed in our AI memory shortage theme, where I called memory a cyclical bet. This week was a reminder of how fast cyclical stocks can move in both directions.

Why did AI stocks crash after the midterms?

There wasn't one single cause. It looks like several worries hit at once.

1. Fear of new rules on AI and data centers

Democrats won control of Congress on Tuesday, and many state races went the same way. NBC News described "a blue wave of victories by anti-AI candidates from Maine to Alaska," and reported that "hundreds of candidates who pledged to rein in AI data centers have been elected." Several of the biggest data center markets, including Texas, Ohio, Michigan, and Georgia, were in focus, and NBC noted that Democrat Gina Hinojosa won an upset in the Texas governor's race.

Data centers need huge amounts of land, power, and water, and they have become a local political issue. If states slow down permits or add costs, the companies building and supplying data centers could grow more slowly than investors expected. I wrote about how much the economy has come to lean on data center spending in my post on whether data centers are propping up the U.S. economy.

2. Doubts about whether AI spending will pay off

Even before the election, investors were asking whether the enormous amount of money going into AI will produce enough profit to justify it. NBC News pointed to that question as a key driver of the selling. When a stock is priced for years of fast growth, any hint that growth could slow can cause a big drop.

3. Investors locking in profits

Many AI stocks had huge gains this year, so there was a lot of profit to take. Nomura's Charlie McElligott told Yahoo Finance that hedge funds appeared to be locking in their 2026 gains, rather than reacting to weaker business results, and he summed up the selling of market leaders with: "They're shooting the generals." Retail investors sold too. Vanda Research's Viraj Patel called it "a total capitulation by retail investors."

4. Rates and oil in the background

Oil rose again on Thursday, with Brent up about 3.8%, according to NBC News. Meanwhile, traders still expect the Federal Reserve might raise rates at its December 8 and 9 meeting, though NBC reported the odds of a hike fell to about 60%. Higher rates tend to hurt growth stocks the most, because more of their value depends on profits far in the future.

President Trump weighed in on Truth Social, writing that "The Stock Market suffered one of the Worst Days in History based on the results of the Election."

What happened on Friday?

Friday brought a partial rebound, but not a full recovery. Asian markets opened sharply lower first: NBC News reported that South Korea's Kospi fell about 8% at the open and briefly paused trading, with SK Hynix down more than 10% and Samsung down about 6.3%, while Japan's Nikkei fell about 6%.

In the U.S., Yahoo Finance reported these Friday closes:

• Nasdaq Composite: up about 1.1%, to roughly 24,579.
• S&P 500: up about 0.3%, to roughly 7,377.
• Dow: down about 0.4%, to roughly 51,286.

A strong jobs report helped. Yahoo Finance reported that the economy added 165,000 jobs in October, far above the roughly 65,000 to 70,000 economists expected, and that the unemployment rate came in at 4.1%. White House economic adviser Kevin Hassett said "demand for labor is skyrocketing." A strong economy is good news for company profits, although it can also make the Fed more willing to raise rates.

The selling also spilled into private markets. Yahoo Finance reported that Anthropic's valuation in its upcoming IPO could fall to near $1 trillion, down from about $2 trillion projected last month, and that its debut could slip. I covered the filing in my post on Anthropic's S-1.

Is this the AI bubble bursting?

Nobody knows for sure, and anyone who tells you otherwise is guessing. But the experienced voices I read this week mostly said no, while admitting prices had run too far.

• Ed Yardeni of Yardeni Research told NBC News: "I don't think this is an AI bubble bursting. I think it's an AI bubble losing some air very, very rapidly."
• Jim Cramer said on CNBC that the sell-off probably isn't over, but that it isn't another dot-com crash, because "unlike 2000, these are mostly lucrative companies with stocks that went too high."
• Lisa Su, AMD's CEO, told Yahoo Finance: "I think the market can sometimes be a little bit short-sighted."

Cramer's point is the one I find most useful. In 2000, many internet companies had little or no profit. Today, Nvidia, Microsoft, Alphabet, and others earn enormous profits. That does not make their stocks safe at any price, though. A great company can still be a bad investment if you pay too much for it, which is exactly what I explain in my P/E ratio explainer. The more fragile names are the ones that borrowed heavily to build data centers, which Cramer also flagged, and which I discussed in my post on AI compute as an asset class.

What should investors watch next?

• The Fed, December 8 and 9. A rate hike would add pressure on growth stocks. A pause could help.
• The new Congress in January. Talk of AI and data center rules is one thing. Actual bills, and whether they can pass with a Republican president's veto, are another.
• State and local action. Watch permit decisions, power pricing, and new rules in big data center states like Texas, Ohio, Michigan, and Georgia.
• Company spending plans. If the biggest tech companies keep their AI budgets, the chip and memory makers keep their customers. Any cuts would matter far more than headlines.
• The Anthropic IPO. Its timing and price will be a real-time test of how much investors still want to pay for AI.

How I'm thinking about it

This is my personal opinion, not advice. I don't think one terrible day changes the long-term story for AI, but I do think it changed the price investors are willing to pay, and that's healthy. Political risk is real, but laws take time, and a Republican president can still veto federal bills. The business results are what I'll watch most closely.

Here's what I am and am not doing. I'm not panic selling, and I'm not trying to catch the exact bottom either. If I buy, I'd spread purchases out over weeks or months instead of going all in at once, and I'd favor profitable companies over ones that rely on borrowing. Most importantly, I'm reminding myself why diversification exists. If one sector falling 10% to 20% in a day would wreck your plans, that's a sign your portfolio is too concentrated, not a sign to time the market. For a longer view on buying during big drops, see our case study on buying every bear market.

Key takeaways

• Thursday, November 5 was a historic down day for AI stocks: the Nasdaq fell about 5.5%, chips fell about 12%, and trillions in value were erased.
• The main fears were political and financial: new limits on AI and data centers after the midterms, doubts about AI spending, and profit-taking after a big year.
• Friday brought a partial rebound, helped by a strong jobs report, but the S&P 500 still had its worst week since June.
• Experts mostly called it air coming out of the bubble, not a 2000-style crash, because today's AI leaders are highly profitable.
• Watch the Fed in December and any real policy in January, and stay diversified instead of trying to time the bottom.

I'll keep following this as it develops. Thanks for reading.

More soon,
Learn to Love Money

Sources

• NBC News: Stocks plunge as election outcome and AI worries crush tech shares
• Yahoo Finance: Dow plunges 1,800 points, Nasdaq enters correction in AI trade meltdown (November 5)
• Yahoo Finance: Nasdaq and S&P 500 rebound, Dow slips to cap bruising week for AI stocks (November 6)
• CNBC: Jim Cramer says the AI sell-off isn't over, but it isn't another dot-com crash
• The Cryptonomist: AI stocks market crash hits trillions after US midterms