AI Stocks Crash: Chip Index Falls 12%, Its Worst Day Since March 2020

AI stocks crash headlines were accurate on Thursday, November 5: the PHLX Semiconductor Index fell 12.3% to 9,011, its worst day since March 2020, and Nvidia lost 9.3%. The Nasdaq Composite dropped 5.5% and closed 11.9% below its October 6 record, which puts it in a correction. Investors are repricing the risk that the data center build-out behind the AI trade slows, after Democrats swept the midterms and with borrowing costs still high.

-12.3%

PHLX Semiconductor Index, Nov 5 close

-5.5%

Nasdaq Composite, to 24,315

-9.3%

Nvidia, to $181.60

~$900B

Magnificent Seven value lost heading into the final hour, per CNBC

All three major indexes had their worst day since April 2025

The S&P 500 fell 4.4% to about 7,354, and the Dow lost 1,833 points, or 3.4%. For all three major indexes, Thursday's closing drop was the largest since April 4, 2025, during the Liberation Day tariff rout. The selling more than erased Wednesday's rally, which AP noted had been the market's best day in three months. The Russell 2000 fell about 4.5%, and CNBC reported it entered a correction of its own.

Fear gauges moved fast. The VIX volatility index jumped about 60% to close near 26.6. Individual investors sold a net $358 million of US stocks by 2:58 p.m. Eastern, the most since March 17, 2020, according to Vanda Research data cited by Yahoo Finance. Asia had already flinched: South Korea's Kospi tumbled 5.3%, AP reported.

Memory and chip equipment stocks fell hardest

Every one of the 30 stocks in the semiconductor index traded lower during the session, FXStreet reported. FXStreet said the last worse drop was 15.9% on March 16, 2020, and that Thursday's fall topped a 10.3% slide on June 5. The index now sits 38.4% below its June 22 record close.

Nvidia was the largest weight on the S&P 500. It closed at $181.60, its biggest one-day fall since the DeepSeek selloff of January 2025, a day after losing 3.2%. Yahoo Finance calculated that the slide from its October record has erased nearly $1.4 trillion of market value, that Nvidia was worth about $4.4 trillion at the session low, and that the stock was on track for a fifth straight losing week.

The table's last column explains part of the speed. Micron, Sandisk and AMD are still far ahead for the year, so holders had large gains to protect. Not everything fell: AppLovin jumped 31% after its results, and Richard Clode of Janus Henderson told CNBC he saw some rotation into internet names. Software offered little shelter, with Palantir down 9.7%.

Data center politics supplied the trigger

We reported Wednesday on how AI data center stocks reacted to the midterms, including Texas, which holds 27% of planned US data center gigawatts by Wells Fargo's estimate. A day later the fear spread from neoclouds to the chipmakers that supply them. CNBC said investors worry that Democrats' wins in Congress and in key governor's races could slow the build-out. Senator Bernie Sanders renewed his call for a national data center moratorium in a post on X on Wednesday, CNBC reported.

Peter Boockvar of One Point BFG Wealth Partners told CNBC that investors are now questioning the $1.2 trillion of capital spending forecast for next year. FXStreet reported that Dan Ives of Yorkville Ives contends the Democratic win could bring peak AI capex forward to 2027, from later in the decade, though he still expects more than $1 trillion of hyperscaler spending next year. None of this is law yet. Any federal rule would need President Trump's signature, and the Texas Legislature stays in Republican hands.

The industry is already responding. OpenAI published a pledge on Thursday to pay the full cost of power and grid infrastructure for its data centers and to stop asking local officials to sign non-disclosure agreements, CNBC and Android Headlines reported. The coverage describes no enforcement mechanism.

Rates, guidance and hedge fund selling added to the pressure

AP also pointed to worries that expensive borrowing will slow construction. The 10-year Treasury yield eased to 4.83%, from above 5.30% last month, but Reuters reported that Federal Reserve officials Beth Hammack and Thomas Barkin hinted at possible future rate hikes. CME FedWatch odds of a December hike were 70.1% at midday, CNBC said. Disappointing guidance from Arm and Qualcomm did not help, Investing.com reported: Arm fell 13.1% and Qualcomm 9.5%.

Positioning made the moves larger. Yahoo Finance described a rush by hedge funds to lock in 2026 profits before year-end, and Nomura strategist Charlie McElligott wrote that the catalyst was not a sudden deterioration in fundamentals. Yahoo Finance noted that Lam Research was down 36% and Applied Materials 30% over the past month.

Views on what comes next split. Mohamed El-Erian told CNBC the market is overdoing it and will keep overdoing it for a while. Macro Research Board wrote in a note cited by CNBC that the shakeout in AI stocks has much further to run.

What the AI Bubble Index says

The AI Bubble Index read 63.3 at its latest published close, November 3, in the Normal band and down from 64.4 a week earlier. That reading predates both this week's post-election sessions, so it does not reflect Thursday's fall. Fragility, at 72.2, already sat well above Euphoria at 62.8. The momentum family had dropped to 51.5, while sentiment and attention stayed the hottest at 92.8. The dashboard will show how the components absorb this session once it is published.

We work through whether this counts as a burst in our analysis of the AI bubble question, and our guide to bubble indicators covers the signals that history says matter. The first leg of this selloff is in our report on the $1 trillion tech drop of October 30.