Wall Street experienced its most severe single-day decline in over a year on Thursday, with the Nasdaq Composite plummeting 5.52% and the S&P 500 falling 4.36%. The rout, the worst since April 2025, was driven by a massive selloff in technology and AI-related stocks, triggered by political uncertainty following the U.S. midterm elections, E24 reported.
Democratic Victory Fuels Market Uncertainty
The immediate catalyst for the downturn was the Democratic Party’s sweeping victory in the midterm elections, securing control of both the Senate and the House of Representatives. This political shift has created significant uncertainty regarding the future of data center construction and, by extension, demand for AI chips, according to Joachim Bernhardsen, chief strategist at Nordea. He said there is concern that the Democratic victory could slow the building of new data centers and with it the AI boom.
The fear is that Democrats could impose stricter regulations on the rapid expansion of data centers, a major campaign issue in several states.
Tech Stocks See Worst Drop of 2026
- The Nasdaq Composite’s 5.52% drop is its worst single-day performance since April 2025 and the largest of 2026.
- Fear of regulatory headwinds from a Democratic-controlled Congress is the primary driver of the tech selloff.
A Brutal Day for Tech and AI
Technology stocks bore the brunt of the sell-off. Nvidia (NASDAQ: NVDA), a bellwether for the AI chip market, fell 9.26%, while Tesla (NASDAQ: TSLA) and SpaceX saw their valuations decline by 10.77% and 9.05%, respectively. The losses for Elon Musk’s enterprises were part of a two-day rout that erased nearly 995 billion kroner from his personal fortune, E24 reported.
The Philadelphia SE chip index fell 10.2%, with Broadcom (NASDAQ: AVGO) (-10.43%) among the steep decliners. The selloff was so severe that some analysts, like Ed Yardeni of Yardeni Research, described it as the “cold shower” the market had been expecting after the election results. “It’s the KI-bubble that is losing air very, very fast,” Yardeni commented.
The Democratic sweep is getting a split reaction on Wall Street, where investors are embracing the prospect of divided government even as results in Texas and other key states threatened to upend the AI trade that has powered markets all year. 🔗 https://t.co/M9rwx2ow6n pic.twitter.com/sc2BXVuAi3
Nasdaq Sees Volatile Year of Swings
Thursday’s decline was not an isolated event but the culmination of a volatile year for the Nasdaq. The index has seen a “roller coaster” ride, marked by significant swings. It fell more than 10% from its October 2025 peak by March 2026, rallied to new highs in June, fell again in July, and surged once more in September and October. From its peak on October 6, the Nasdaq is now down 11%, NRK noted.
While the magnitude of the drop is dramatic, Nordea’s Bernhardsen cautioned against interpreting it as a definitive sign of a bursting “AI bubble.” He pointed out that short-term drops of 5-10% are not unusual in equity markets and that Thursday’s action may reflect more panic selling than a fundamental reassessment of the sector’s long-term prospects. “On such days, it’s not necessarily that investors are making up their minds about the future and believe prices should be lower. It’s a case of investors throwing in the towel and panic-selling a bit,” he explained to NRK.
| Index | Thursday’s Change | Previous Worst Day in 2026 |
|---|---|---|
| Nasdaq Composite | -5.52% | -4.18% (June 5) |
| S&P 500 | -4.36% | -2.64% (June 5) |
| Dow Jones | -3.44% | – |
Global Spillover and Retail Investor Behavior
The turmoil on Wall Street quickly spilled over to other markets. Oslo Børs fell 1.1%, with Aker BP down 9.8% after its major shareholder, BP, announced a stake sale.
Else Høeg Sundfør, a savings economist at Nordnet, noted that roughly half of Norwegians have money in equity funds, many of them in global index funds where American tech giants like Nvidia, Microsoft, Apple and Alphabet carry heavy weight.
Market Experts Debate the Downturn's Impact
The immediate question for markets is whether this is a short-term correction or the start of a deeper downturn. Bernhardsen cautioned against drawing overly firm conclusions about the consequences for the AI build-out. “I don’t think we should necessarily conclude that this will have enormous consequences. But the market is at least going a long way toward thinking that this will significantly slow the development,” he said.
However, others suggest the impact of the election may be less dire than feared. Yardeni argued that the development on the stock exchange is not a sign that the AI bubble is bursting, but rather that it is losing air quickly — which he believes reduces the chance of a burst that would have major consequences for the economy. The key now is to watch how the political rhetoric translates into actual policy. For now, the market’s reaction is clear: a massive repricing of risk for the entire technology and AI sector based on the new political calculus in Washington.
The Democratic Party has taken control of the Senate and House in what WSJ's Christopher Matthews calls a “rebuke” of President Trump. We look ahead to the new Congress's future relationship with the president. https://t.co/FS9zEwAeNY
