AI stock plunge drives S&P 500 to worst day since 2025 tariffs

A sharp decline in artificial intelligence stocks caused major U.S. market indexes to fall on Thursday. The drop erased the previous day's gains, which had been the strongest in three months. Investors sold off shares tied to the construction of AI data centers, leading to broad losses across Wall Street.

The S&P 500 index closed down 4.4 percent, marking its steepest single-day drop since April 2025. The Dow Jones Industrial Average lost 1,833.06 points, or 3.4 percent, to finish at 51,523.06. The Nasdaq composite, which includes many technology companies, fell 5.5 percent to close at 24,315.00. This decline pushed the Nasdaq 11.9 percent below its all-time high set last month, a level market analysts define as a correction.

Nvidia, a chipmaker central to the AI industry, saw its stock drop 9.3 percent. This move made Nvidia the largest single factor weighing on the S&P 500. The company's shares are now down 2.6 percent for the year, following annual gains of roughly 39 percent, 171 percent, and 239 percent over the last three years. Advanced Micro Devices fell 17.3 percent, while CoreWeave, a provider of cloud access to AI chips, dropped 9.8 percent. GE Vernova, which supplies power solutions for data centers, sank 7.5 percent.

The sell-off was influenced by Tuesday's U.S. midterm elections, in which Democrats achieved nationwide victories. These results raised concerns that future government policies might slow the construction of new data centers. Voters from various political parties have expressed wariness about AI and dissatisfaction with rising electricity bills attributed to data center operations. A slowdown in construction would reduce demand for AI chips, electricity, and other services currently driving U.S. economic growth.

Global markets also reacted to the U.S. decline. South Korea's Kospi index tumbled 5.3 percent, while Japan's Nikkei 225 index fell 1.8 percent. In Europe, London's FTSE 100 dipped 0.4 percent. The Bank of England raised its main interest rate for the first time in three years to combat high inflation. Bank Governor Andrew Bailey stated that future interest rate decisions will depend heavily on developments in the war with Iran, which has driven up global oil prices and inflation.

Not all stocks fell during the session. AppLovin, a marketing platform, jumped 31 percent after reporting revenue and profits that exceeded analyst expectations. The company's board also approved a program to return up to $3.2 billion to investors through stock buybacks, increasing the total potential value of the program to $3.6 billion. Tapestry, the parent company of Coach and Kate Spade, rallied 7.1 percent after delivering stronger-than-expected profits and raising its forecasts for the current fiscal year.

In other markets, the initial reaction to the midterm election results softened slightly. Brent crude oil prices rose 3.9 percent to $98.29 per barrel, recovering from a nearly 9 percent drop the previous day. Uncertainty remains regarding the duration of the conflict with Iran and its impact on the global energy industry. In the bond market, yields on U.S. Treasuries continued to fall. The yield on the 10-year Treasury decreased to 4.84 percent from 4.90 percent late Wednesday, after having been above 5.30 percent last month.

Economic data released recently showed mixed signals. Fewer U.S. workers applied for unemployment benefits in the previous week, and productivity for U.S. workers improved more than economists expected during the summer. These reports suggest the economy may grow without adding excessive pressure to inflation. However, stock prices have historically tracked corporate profits and interest rates more closely than political control in Washington, a dynamic that played out during Thursday's trading session.