The S&P 500 shed roughly $2 trillion in market value in just 40 minutes on Thursday, as Wall Street reacted to midterm election results that handed Democrats control of both chambers of Congress. The outcome left investors worried about what comes next for America's capital-intensive AI ambitions, triggering a sharp intraday reversal.

The index dropped 2.8%, erasing Wednesday's 1.6% gain, while losses across the broader market exceeded $2.3 trillion by midmorning. The turnabout was striking given that investors had celebrated the very same election results only a day earlier.

Why the election results hit AI stocks

Democrats did not stop at Congress. The party also captured several important governorships, giving it greater influence over how states handle the construction of AI data centers. That creates challenges for technology companies that have spent billions on infrastructure: new rules could make power costs more expensive and hinder the construction process. Attention is now turning to whether the industry can deliver the profits expected from its enormous investments, with state-level decisions on data-center rules and power costs likely to shape how those infrastructure plans proceed.

Semiconductor and AI-linked names bore the brunt of the selloff. AMD crashed 12%, while Nvidia and Broadcom each lost around 6%. Oracle suffered a similar decline, and the iShares Semiconductor ETF (SOXX) plunged 8%.

Qualcomm faced a separate problem: despite beating Wall Street's earnings estimates, the chipmaker's weak outlook sent its shares down 11%.

Tesla fell 9%, SpaceX dropped 7%, and Dell lost 10%. Conditions were particularly severe for companies selling computing capacity to AI developers, with CoreWeave down 9%, Nebius sinking 13%, and Iren losing 14%.

The Nasdaq Composite declined 3.9%, leaving it more than 10% below its October record and officially in correction territory, a threshold generally understood as a decline of 10% or more from a recent peak. The Dow Jones Industrial Average did not escape either, falling 1,153 points, or 2.2%. The swing was all the more notable because on Wednesday the Dow had soared more than 1,500 points, its strongest day since April 2025.

Gold surges as oil and Treasury markets react to Democratic sweep

Oil prices rebounded on Thursday after their steep decline the prior day, which had been driven by speculation about Democrats' ability to put enough pressure on President Trump to end the military campaign in Iran. West Texas Intermediate appreciated by more than 2%, closing above $90 per barrel, while Brent futures rose by a similar percentage and approached $97.

The earlier fall in energy prices had helped relieve inflation worries, but investors looked elsewhere for shelter. December gold futures climbed to $4,155.80 per ounce, the highest since October 22, and December silver futures hit $53.49, their highest level since October 29.

Both metals benefited from a weaker dollar and declining Treasury yields, which made assets without interest payments relatively more attractive. Gold has risen more than 5% this week and is set to record its biggest weekly gain since August 7, while silver has climbed more than 6%, its best performance since August 21.

Mining stocks followed suit. The VanEck Gold Miners ETF rose around 1% on Thursday and has gained more than 10% for the week. Harmony Gold and IAMGOLD each rose more than 13% this week, while Equinox Gold has advanced more than 15%.

Meanwhile, Wall Street's CBOE Volatility Index, commonly called the fear gauge, reached 22.59 as investors rushed to protect themselves against further losses. The index tracks expected near-term volatility in the S&P 500 derived from options pricing.

The labor market offered a surprisingly positive note amid the turmoil. According to Labor Department data released Thursday, initial jobless claims, a weekly gauge of new unemployment filings, dropped by 6,000 to 189,000 in the week ending October 31, below the 197,000 filings economists surveyed by Dow Jones had expected. The figure is in line with July's low, a level similar to those recorded since September 1969. Continuing claims, however, rose by 23,000 to 1.72 million, indicating that more Americans were receiving unemployment benefits after their initial claims.

Source: Cryptopolitan