Panic Hits Wall Street As Record-breaking AI Stock Selloff Wipes Out Trillions After Midterms

US stocks suffered a sharp broad-based selloff on Thursday, with technology shares leading losses as investors questioned whether the artificial intelligence trade had run too far. The slide erased about $2.5 trillion in market value in one session and pushed the Nasdaq Composite into correction territory, underlining how quickly sentiment has shifted around high-growth technology companies.

The tech-heavy Nasdaq Composite fell 5.5%, its steepest one-day decline in 18 months, and dropped 10% below its recent record high. The S&P 500 also posted its worst single-day fall since April 2025, while the Dow Jones Industrial Average lost 1,833 points, or 3.4%, to close at 51,868.

AI stock selloff hits market leaders

The pressure was most visible in stocks tied closely to artificial intelligence infrastructure. Nvidia, which had previously held the position of the world’s largest company by market capitalisation, dropped 9.3%. The fall pushed its shares into negative territory for the year, a notable reversal for one of Wall Street’s strongest AI-linked names.

Other hardware and storage companies also came under heavy selling pressure. SanDisk plunged 22%, while Western Digital declined 17%. The scale of the falls suggested investors were not only taking profits but also reassessing future demand from data centres, cloud platforms and companies investing heavily in AI capacity.

The selloff reflected growing concern that capital expenditure on artificial intelligence may face closer scrutiny. Investors have become increasingly sensitive to whether AI-related spending can generate returns quickly enough to justify lofty valuations. Any sign of slower data centre expansion can therefore hit chipmakers, memory suppliers, power equipment firms and infrastructure-linked stocks together.

Broader US market also comes under pressure

The weakness was not limited to technology. All 11 sectors in the S&P 500 ended lower, showing that the selloff had spread across the wider US equity market. Seven of those sectors recorded losses of at least 2%, a sign that portfolio managers were cutting exposure across industries rather than selling only a narrow group of AI stocks.

Among major Dow components, Caterpillar fell 6.4%, JPMorgan Chase declined 4.2%, while UnitedHealth and 3M both lost more than 3%. The fall in financials, industrials and healthcare stocks indicated that investors were also pricing in broader uncertainty over growth, policy direction and market valuations.

Wall Street’s volatility gauge, the VIX, surged 61% to its highest level since the early weeks of the Iran war. The VIX is often described as the market’s fear index because it tracks expected volatility in the S&P 500. A sharp rise usually signals higher demand for portfolio protection and increased anxiety among investors.

As equities fell, investors moved into safer assets. Demand for US government bonds rose, pushing the yield on the benchmark 10-year Treasury note to its lowest level since September 9. Bond yields move inversely to prices, so a fall in yield usually reflects stronger buying interest in Treasuries during periods of market stress.

Trump links Wall Street crash to midterm result

US President Donald Trump blamed the selloff on the result of the midterm elections, after Democrats secured a strong victory and wrested control of Congress from Republicans for the rest of his term. His remarks added a political layer to an already volatile market session.

“The Stock Market suffered one of the Worst Days in History based on the results of the Election. Such a sad thing to watch! It took so much work to get us to a level that no one has ever seen before, and then this,” Trump wrote. “Your 401(k)s have, therefore, dropped. Remember, it wasn't Republicans, it was Dumocrats. Do not fear, however, we will soon, one way or the other, be BIGGER AND STRONGER THAN EVER BEFORE.”

In a separate post, Trump wrote, “The Stock Market crashed today because the Dumocrats had a big Tuesday — So sad to see, you only have yourselves to blame!” Markets often react to political change when investors expect shifts in taxation, regulation, spending or oversight. In this case, concerns around possible tighter scrutiny of large technology and AI companies added to the pressure.

For investors, the key issue is whether the midterm result changes the regulatory backdrop for the technology sector. Artificial intelligence has become central to market leadership, but it has also raised questions around competition, data usage, energy demand, national security and job disruption. Any expectation of tougher rules can affect valuation assumptions for the sector.

Asian markets feel the impact

The selloff quickly spread beyond the US. In early Friday trade, Japan’s Nikkei slid 6%, while South Korea’s Kospi tumbled more than 8%. Asian markets are particularly exposed to shifts in the AI and semiconductor cycle because several major regional companies supply chips, memory, displays and electronics components to global technology firms.

For Indian investors, the immediate impact will be watched through technology stocks, export-oriented companies, global funds and broader risk appetite. A steep correction in US markets can trigger caution across emerging markets, especially when foreign investors reduce exposure to risk assets. However, domestic fundamentals, earnings and currency movement will also shape the local market reaction.

The sharp fall does not by itself mark the end of the AI investment cycle, but it shows that markets are becoming less forgiving. Investors are now likely to focus more closely on cash flows, spending discipline, regulatory risk and realistic timelines for AI returns. That shift could keep volatility elevated across global equities in the near term.

FAQs

What happened to US stocks during the sharp selloff mentioned in the text?

US stocks fell sharply in a broad selloff, with technology shares leading the losses. The decline erased about $2.5 trillion in market value in one session and pushed the Nasdaq Composite into correction territory.

How did the Nasdaq Composite and other major US indexes perform?

The tech-heavy Nasdaq Composite dropped 5.5%, its steepest one-day fall in 18 months, and fell 10% below its recent record high. The S&P 500 also saw its worst single-day decline since April 2025, and the Dow Jones Industrial Average fell 1,833 points, or 3.4%, to close at 51,868.

Which AI-related stocks and hardware companies were hit hardest?

Nvidia fell 9.3%, reversing its earlier status as the world’s largest company by market capitalization and pushing it into negative territory for the year. SanDisk dropped 22% and Western Digital declined 17%, indicating heavy selling across AI-linked hardware and storage.

Why did investors appear concerned about AI spending and valuations?

The text says investors worried that capital expenditure on artificial intelligence could face closer scrutiny. It also notes increased sensitivity to whether AI-related spending can generate returns fast enough to justify high valuations, where signs of slower data center expansion could affect chipmakers, memory suppliers, power equipment firms, and related infrastructure stocks.

How did the selloff affect volatility, bonds, and markets outside the US?

The VIX surged 61% to its highest level since the early weeks of the Iran war, signaling higher expected volatility in the S&P 500. Demand for US government bonds rose, sending the 10-year Treasury yield to its lowest level since September 9, and the selloff also spread to Asia with the Nikkei down 6% and the Kospi down more than 8% in early Friday trading.