Nasdaq posts biggest daily drop in 19 months

The Nasdaq Composite ended sharply lower on Thursday, notching its deepest one-day drop in 19 months and confirming it was in a correction, as chipmakers sank on fears of tougher AI regulation after Democrats won control of the US Congress.

Democratic wins on Tuesday, including in states where opposition to new data centres has mounted, fuelled concerns that tighter regulation could slow the AI infrastructure buildout that has helped lift stocks to record highs this year.

Nvidia dropped over 9.0 per cent, while the Philadelphia SE Semiconductor index plunged over 12 per cent.

The selloff evaporated $US3 trillion ($A4.3 trillion) in stock market value from S&P 500 companies.

The Nasdaq Composite logged its biggest daily drop since President Donald Trump’s “Liberation Day” tariff announcement in April 2025. The index also confirmed a technical correction, or a 10 per cent drop from its October 6 record-high close.

“Investors appear to be recognising that some newly elected members of Congress and governors are looking to slow the pace of AI infrastructure development,” said Melissa Brown, global head of investment decision research at SimCorp.

“While it seems unlikely that they will be able to stop it altogether, any slowdown would raise concerns because the AI growth story has largely depended on the rapid buildout of supporting infrastructure.”

The Nasdaq Composite ended down more than 10 per cent from its October 6 record-high close, confirming a technical correction.

While chipmakers that provide components for AI data centres were among the deepest decliners, other large-cap tech stocks also lost ground after rallying on Wednesday. Meta Platforms slid 4.0 per cent, while Amazon.com and Alphabet each dropped 2.2 per cent.

Data centre companies IREN and Applied Digital fell more than 14 per cent, while CoreWeave dropped almost 10 per cent.

AI-exposed utilities and equipment suppliers GE Vernova and Constellation Energy fell 7.5 per cent and 2.5 per cent, respectively.

Elon Musk’s Tesla and SpaceX both dropped. Musk spent nearly half a billion dollars backing Republican candidates in the midterm elections.

Qualcomm fell 9.5 per cent after the chipmaker fell short of Wall Street estimates for fourth-quarter smartphone chip sales.

“This feels like the capitulation phase for the data centre capex beneficiary stocks, especially the semiconductors,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “But I think the magnitude of the moves is outsised.”

The S&P 500 dropped 4.36 per cent to end the session at 7,353.73 points.

The Nasdaq declined 5.52 per cent to 24,315.00 points, while the Dow Jones Industrial Average fell 3.44 per cent to 51,523.06 points.

Following Thursday’s selloff, the S&P 500 remains up 7.4 per cent in 2026, while the Nasdaq is up 4.6 per cent.

Volume on US exchanges was very heavy, with 26.9 billion shares traded, compared to an average of 17.7 billion shares over the previous 20 sessions.

On Wednesday, the S&P 500 clocked its biggest one-day percentage gain in three months, as political uncertainty eased, boosting risk appetite.

Some analysts said a divided government in Washington could lead to fewer sharp legislative changes and may make it harder to agree on fiscal spending.

Cleveland Federal Reserve President Beth Hammack and Richmond Fed chief Thomas Barkin hinted at the possibility of future rate hikes in comments on Thursday.

Focus will be on the US October nonfarm payrolls data due Friday. Traders currently expect the Fed to hike rates next month following the September rate hike.