Nasdaq heads for correction as chip stocks slump on AI regulation fears

what happened

Reuters reports that the Nasdaq Composite was close to entering a technical correction on Thursday, meaning a fall of 10% or more from its October 6 record close. Chip stocks led the decline, with Nvidia down 7.7% and the Philadelphia SE Semiconductor index sliding almost 10%. Investors reacted to the Democratic victory in the midterm elections, which intensified worries that newly elected lawmakers and governors could slow the expansion of AI data centers.

Data center operators, cloud providers focused on AI, and energy companies and equipment makers tied to AI also came under pressure. Tesla and SpaceX dropped 9% and 11.4%, while Qualcomm lost 11.5% after missing Wall Street forecasts for fourth-quarter smartphone chip sales. At midday ET the Dow was down 2.63%, the S&P 500 3.41% and the Nasdaq Composite 4.55%. Every S&P 500 sector traded lower, with technology and consumer discretionary leading the losses.

why it matters

The Nasdaq-100 already entered a correction on Monday, and a drop of around 5.2% would wipe out more than $2 trillion in market value if it holds. Investors are also watching the US October non-farm payrolls report due Friday, since traders expect the Fed to raise rates next month after its September hike, and Fed officials Beth Hammack and Thomas Barkin hinted at that possibility.

market impact

US stocks: AI regulation fears pressure chipmakers and the Nasdaq as a whole

• ▼Nasdaq Composite pressure down — fears of slower data center construction weigh on tech shares
• ▼Philadelphia SE Semiconductor index pressure down — worries over tougher AI rules and Qualcomm's chip sales miss
• ▼AI data center stocks pressure down — expected slowdown in AI infrastructure spending hits operators and suppliers

instruments