The Nasdaq Composite dropped 3.2% in early trading on Thursday, reversing gains from the prior session as investors pulled back from artificial intelligence-related stocks and data center construction plays. The selloff extended to the broader market, with the S&P 500 falling 2.8% and the Dow Jones Industrial Average losing 2.2% by late morning, according to the Associated Press.
The shift followed a day when the Dow surged 1,500 points and the S&P 500 and Nasdaq each rose over 1%, fueled by post-election optimism. By Thursday, however, concerns about the timeline for returns on AI infrastructure investments weighed heavily. Companies pouring billions into data centers, chips, and servers face long lead times before those investments translate into profits, leaving investors skeptical about whether current valuations are justified.
Political uncertainty added to the pressure. Democrats’ wins in Congress and key state races raised questions about whether new data center projects could face stricter regulatory scrutiny or local opposition. Stocks tied to data centers, such as Nebius and IREN, declined, as did major chipmakers like Nvidia and AMD. The selloff also hit Qualcomm, whose shares fell after its earnings outlook disappointed despite beating quarterly revenue expectations. The reaction highlighted how closely markets now monitor not just results, but forward guidance.
While the broader semiconductor sector declined, the losses were concentrated in AI-linked stocks. The AP reported that roughly two out of every five S&P 500 stocks were higher late Thursday morning, with some companies advancing on company-specific results. The reversal showed how quickly investor sentiment can shift when assumptions about growth trajectories are questioned.
The Nasdaq’s drop brought it roughly 10% below its October 6 record close, a level often used to signal a market correction. The move followed Wednesday’s rally, which had been driven by reduced political uncertainty and easing inflation pressures from lower oil prices. Yet even as indexes climbed, data center stocks remained under pressure, signaling persistent doubts about the sustainability of AI-driven gains.
The next major market signals will likely come from corporate guidance on AI spending and the government’s October jobs report, set for release on Friday, November 6. Until then, volatility in tech and infrastructure-linked stocks is likely to continue as investors weigh the balance between near-term risks and long-term bets.