Why the stock market fell: the worst day since April 2025, led by AI chips

The S&P 500 fell 4.4% on Thursday, its worst day since the tariff crash of April 2025, as investors dumped the chip and data centre shares that have carried the market for three years. Why did the stock market fall so hard, a day after a rally? The most likely answer is the vote. Democrats won both houses of Congress on 3 November, and the market began to price a slower, more regulated AI buildout. The S&P 500 closed at 7,353.73, down 334.89 points. The Dow lost 1,833.06 points, or 3.4%, and the Nasdaq Composite fell 5.5% to 24,315.00, the Associated Press reports.

The fall wiped out Wednesday’s gain, the market’s best day in three months, and more. The Nasdaq now stands 11.9% below its record of last month, which puts it in a correction, a fall of more than 10%. Nvidia, down 9.3%, was the heaviest weight on the S&P 500, AP says.

How close the market came to a circuit breaker

On trading desks in the afternoon, the talk was of the market-wide circuit breakers. Under the exchanges’ rules, trading in every US stock stops when the S&P 500 falls 7% from the previous day’s close (Level 1), 13% (Level 2) or 20% (Level 3). With Wednesday’s close at 7,688.62, Level 1 sat at 7,150.42. The index closed about 200 points, or 2.8%, above that line.

A Level 1 or Level 2 fall before 3.25pm New York time halts trading for 15 minutes. A Level 3 fall closes the market for the rest of the day. The breakers last fired four times in March 2020, and before that once, in October 1997, CNBC notes.

So the halt was not close in the way it was in 2020. But the day was rare. By our count from the daily S&P 500 series on FRED, only ten trading days in the past decade were worse: eight in the Covid crash of 2020 and two in April 2025.

The fear gauge moved even more than the index. The VIX, which measures the price of insurance against swings in the S&P 500, jumped 69.7% to 28.18, by Yahoo Finance’s figures. That is its highest close since 30 March. In the VIX’s daily record on FRED, which goes back to 1990, it has risen more in one day only twice: in February 2018 and in December 2024.

Who performed the worst

The PHLX semiconductor index lost 12%, which left it up about 25% for the year, Yahoo Finance reports. The iShares semiconductor fund had its worst day since March 2020, CNBC says. The heaviest losses fell on firms whose sales depend on new data centres being built, and on the memory makers above all.

• Memory and storage were hit hardest. SanDisk fell 22%, after a 7% fall the day before, Yahoo Finance says. Micron fell 17.5%, by its price history. Western Digital was down 17% and Seagate 14.8% in the afternoon, StockStory reported.
• Chip designers: AMD fell 17.3% and Nvidia 9.3%, AP says. Arm lost 13% and Intel about 10%, Yahoo Finance reports. Broadcom fell 10%, CNBC says.
• The AI landlords: The so-called neoclouds, which rent out AI chips, fell hard: Iren almost 17% and Nebius about 15%, CNBC says, and CoreWeave 9.8%, AP says. GE Vernova, which makes the turbines that power data centres, fell 7.5%.

How far they fell on 5 November 2026, %. Source: Yahoo Finance, the Associated Press, CNBC. The S&P 500, the Nasdaq and the Dow are closing figures.

SanDisk	22.0
Micron	17.5
AMD	17.3
Arm	13.0
Chip index (SOX)	12.0
Nvidia	9.3
Nasdaq 100	6.3
Nasdaq	5.5
S&P 500	4.4
Dow	3.4

Source: Yahoo Finance, the Associated Press, CNBC. The S&P 500, the Nasdaq and the Dow are closing figures.The Macro Notebook

The size of the companies made the damage. The Nasdaq 100 fell 6.3%, which erased about $2.3tn of market value, Yahoo Finance says, and the seven largest tech firms lost close to $900bn between them, by CNBC’s count. Elon Musk’s companies fell too: SpaceX and Tesla were each down more than 9%.

Not everything fell. AppLovin, an advertising software firm, rose 31% on results that beat forecasts, AP says. Software makers far from the data centre trade, such as Salesforce and Adobe, barely moved, Yahoo Finance reports.

Why the stock market fell: the vote, the price and the crowd

Three things worked together.

The vote put the buildout itself in question. As we reported this morning, US voters approved dozens of data centre moratoriums on 3 November, and Democrats won Congress on the same night. Senator Bernie Sanders then called for a national moratorium on data centres. “Americans don’t want Big Tech oligarchs wrecking the environment, gutting jobs and threatening humanity’s future,” he wrote, CNBC reports. Representative Yassamin Ansari of Arizona went further: “Top of the Democratic agenda on day 1 needs to be a pause on advanced AI development,” she posted, 24/7 Wall St. reports. Neither is law, and the new Congress does not sit until January. But a market that had priced years of uninterrupted building now has to price a chance that it slows.

The shares were priced for the boom to go on. We wrote in October that the Nasdaq’s P/E had fallen to about 20 only because chip profit forecasts had soared, and those forecasts can fall. Company news added to the doubt on Thursday. Qualcomm gave a weak profit forecast, blaming higher component costs. Arm’s revenue forecast fell short of the high bar investors had set. Micron paused plans for a plant in Taiwan over a labour dispute, Yahoo Finance reports. Demand today is not the problem: Micron has said more than 75% of its shipments for its 2027 financial year are already committed. The question is the years after.

The crowd ran for the door at once. Nomura’s Charlie McElligott described a “frantic dash” by hedge funds to lock in this year’s gains, and called the unwind “wildly acute”, Yahoo Finance reports. Small investors sold too. They sold a net $358m of US stocks, the most in a day since 17 March 2020, Vanda Research says. “This is what we would call a total capitulation by retail investors,” said Vanda’s Viraj Patel.

Interest rates were not the trigger. Bonds rallied as stocks fell: the 2-year Treasury yield dropped 12 basis points to 4.46% and the 10-year 6 basis points to 4.84%, by Treasury’s daily figures. Money moved to safety. High borrowing costs are a worry in the background, AP notes: the 10-year yield was above 5.30% last month.

How the rest of the world traded

Asia went first. South Korea’s Kospi, heavy with memory makers, fell 5.3%, and Japan’s Nikkei 225 lost 1.8%, AP says. Europe was mixed: London’s FTSE 100 dipped 0.4% after the Bank of England raised its main rate for the first time in three years. Brent crude rose 3.9% to $98.29 a barrel, after a fall of almost 9% the day before. Bitcoin briefly dropped below $76,000, Yahoo Finance says.

Our view: the most likely cause is the election, working on a market that had left no room for bad news. The vote did not cut a single order for chips. It raised the chance that the next data centres take longer to approve, cost more to power and face rules that do not exist yet. For companies valued on years of growth, that is enough.

What to watch next

• The October jobs report on Friday 6 November, the Bureau of Labor Statistics says. A strong report would raise the chance of a Fed rate rise in December and add a second worry to the first.
• Nvidia’s results on 17 November, the company says: the first word from the largest AI chip supplier since the vote.
• The correction line: The S&P 500 is 5.9% below its record close of 7,818.93 on 6 October. A correction would start below 7,037, by our calculation.
• What Democrats put in writing: Calls on social media are not bills. The first sign of real rules on data centres or AI would move these shares again.