Wall Street took its sharpest hit in months on Thursday as shares tied to artificial intelligence and data centers led a broad sell-off. The S&P 500 tumbled 4.4% for its worst session since April 2025 and the Dow Jones Industrial Average dropped 1,833 points or 3.4%.

The Nasdaq Composite fell 5.5% and closed about 11.9% below its record high set in October which pushed the tech-heavy index into a formal correction. The Nasdaq 100 lost 6.3% and wiped out about $2.3 trillion in value. The wider S&P 500 lost roughly $2.8 trillion.

Investors had mostly priced in a Democratic takeover of Congress. What rattled traders was the scale of the midterm wave and a string of wins by candidates who campaigned on slowing or blocking new AI data centers in big build-out states.

Chip stocks lead the slide

Chipmakers took the heaviest hits after soft overnight earnings from Qualcomm and Arm Holdings. The Philadelphia Semiconductor Index sank 12.3% in its steepest drop since March 2020. An ETF that tracks memory-chip makers dropped almost 18%.

Nvidia fell 9.2% and was the biggest drag on the Dow and the S&P 500. AMD slid about 17%. SanDisk plunged 22% while Micron, Western Digital and Seagate each lost more than 15%. Cloud chip landlord CoreWeave fell nearly 10%.

Big cloud names Alphabet, Meta, Amazon and Microsoft finished lower too though their drops were milder than the chip group. Data center suppliers Cisco and Caterpillar each dropped around 6%.

Midterms raise regulation fears

Texas Ohio Michigan and Georgia are among the largest data center markets in the country. Newly elected Democrats who pledged to rein in the build-out now hold key posts in several of those states including the Texas governor's office. Analysts said that shift raised the odds of tighter rules on power use, water and siting for new facilities.

Joe Maher of Capital Economics told clients the trigger looked like concern that Democrats in Congress and in the states will try to put new rules on the AI industry and curb data center growth. Market watcher Ed Yardeni called the session a cold shower after the blue wave and said he sees an AI boom losing air quickly rather than a full bubble burst.

SpaceX and Tesla each fell close to 10% as investors reassessed how the midterm results may affect those companies. Both firms have poured money into AI and SpaceX has moved into data center work. Combined they have lost more than $400 billion in paper value since Tuesday's results.

Bonds oil and what comes next

Money moved toward safety. Treasury yields eased a bit and traders pulled back wagers on a Federal Reserve rate hike at the December meeting. Brent crude rose 3.8% and U.S. crude gained 2.7%.

Adam Crisafulli of Vital Knowledge warned that the rout could delay a planned Anthropic stock offering that had been eyed for this month with a possible raise of as much as $100 billion. For now the message from the close was clear: the AI trade that powered much of the market's recent gains is facing its stiffest test of the year.