AI stocks bounce back after $2.5 trillion is wiped from the Nasdaq

What did Thursday’s rout actually cost investors?

On Thursday 5 November 2026, Wall Street’s bet on artificial intelligence suffered its worst day in nineteen months. The tech-heavy Nasdaq Composite fell 5.5 percent, its steepest one-day drop since the tariff turmoil of April 2025, while the Nasdaq 100 fell 6.4 percent and erased about $2.5 trillion in market value. S&P 500 companies lost nearly $3 trillion, according to Reuters.

Friday brought a partial recovery: the Nasdaq rose 1.4 percent, the S&P 500 about 0.7 percent, and the Dow was flat through the day. Nvidia, down more than 9 percent on Thursday after losing hundreds of billions in market value, was trading up more than 3 percent, while AMD and Micron, both down more than 17 percent on Thursday, had risen about 10 percent and more than 5 percent. But the relief did not travel: South Korea’s Kospi closed down 6 percent on Friday, with shares in chipmaker SK Hynix plunging more than 10 percent, European markets fell, and the FTSE 100 in London declined 1.01 percent.

What do we actually know about why the selling started?

The trigger was political. The selling began two days after the Democrats swept the 3 November midterms, winning both houses of Congress, as investors priced in tighter rules for artificial intelligence and the data centres that power it. A number of Democrats campaigned for new rules on AI and data-centre construction, and in Texas the governor-elect, Gina Hinojosa, campaigned on halting new data-centre building and rolling back tax incentives. UBS estimated that around 30 percent of expected US data-centre capacity additions in 2028 could be at risk from construction pauses. The scale of that political turn is the story of the midterms themselves, and of the Texas district the Republicans redrew to win; and only just held.

The selling was not only about politics. It was the second straight day of declines in AI-linked shares and the fifth 500-point Nasdaq fall since mid-October, after weeks of scrutiny over the sums being poured into it. Chipmakers bore the brunt: the Philadelphia Semiconductor Index fell 12 percent to its lowest in more than six months, Broadcom fell more than 10 percent, and even Amazon and Alphabet, which had held up a day earlier, each slid 2.2 percent.

Two other facts steadied the market on Friday: US employers added 165,000 jobs in October, more than double what analysts expected, unemployment eased to 4.1 percent from 4.2 percent, and the Bank of England raised interest rates, signalling another rise could follow.

What is still unknowable on Friday night?

The first unknown is whether Friday’s bounce holds. Dan Coatsworth of AJ Bell called it a brutal week and said the key question was whether the rise in the S&P 500 and the Nasdaq would be sustained, adding that next week, once investors had the weekend to catch their breath, would show whether the tech trade was going down or fighting back.

The second unknown is what the new Congress will actually do. No Democrat restriction on AI or data centres has been enacted, and the sell-off reflected expectations about potential policy changes rather than a documented reduction in AI investment. Whether governors and lawmakers turn campaign promises into pauses, permits denied or new rules is still to be decided, and so is the deeper question: whether the billions being spent on AI infrastructure will earn a return, or whether the market priced a future that arrives more slowly than the spending assumes.

Why does a two-day swing in tech shares matter beyond Wall Street?

Because the AI trade has become the engine of the whole market. The Nasdaq is now in correction territory, nearly 12 percent below its record close on 6 October, and a correction in the index carrying the world’s most valuable companies reaches pension funds, retirement savings and business confidence far from any trading floor. The same headwind had already knocked AI-linked shares once this week, when the blue wave first shook Wall Street’s data-centre stocks.

And because the fight is no longer only about share prices. It is about the physical footprint of AI, the data centres consuming power and water in the communities that host them, and who benefits when they arrive. Russ Shaw of the tech advocacy firm Tech London Advocates said the incoming Congress would focus on AI in a very dramatic way, and warned that companies building data centres while local energy costs rise have to be better neighbours. The politics of that bargain, jobs and investment on one side, bills and water on the other, is now priced into the market, and it will not be settled by a single Friday bounce.

How should we read a market that falls 5.5% on a rumour of regulation?

As a repricing of politics, not a verdict on the technology. Nothing about the chips changed between Wednesday and Thursday: the processors, the data centres and the orders were the same. What changed was the price of political risk, and it changed violently because the market had spent a year assuming the AI buildout would face no serious opposition. The trade was already fragile, five drops of more than 500 points since mid-October, and weeks of scrutiny over whether the spending would pay, so the election result did not create the doubt, it gave the doubt a date and a legislature.

The honest reading sits between the two camps. Jefferies’ Jane Gibbons called Thursday reactionary, not a fundamental reset, and the Friday bounce supports her; but JonesTrading’s Michael O’Rourke warned that the slowdown of the data-centre buildout is the theme that is going to stick, and the Friday falls in Seoul and Europe support him. Both can be true: a market can overreact on Thursday and still be right that the politics of AI has changed for good.

What happens next to the data centres, the chips and the money behind them?

The second-order effects run through the companies living off the buildout. Chipmakers and the so-called neocloud firms that rent out AI computing were hit hardest, CoreWeave, which has become a barometer of anxiety over heavy AI spending, fell 12 percent on Thursday, and smaller firms, whose capacity to raise funds was already limited by higher rates and tighter conditions, now face a reckoning over financing the next round of building.

The builders themselves are splitting. OpenAI told CNBC it would press ahead with its data-centre expansion despite the midterm sweep, while Microsoft is winding down its deal to rent AI cloud capacity from Oracle, according to Bloomberg. Between those two facts sits the real question of the next year: whether the hyperscalers keep spending at the pace of the last two years, or whether the first political headwind in the AI boom closes the chequebook a little.

When will investors know whether the bounce is real?

Next week is the test, and it comes in three parts. First, Asia’s open on Monday: if Seoul and Tokyo steady, the rout may have been a Western spasm; if they fall again, the correction has legs. Second, the new Congress: the first bills, hearings and governor-level decisions will show whether campaign promises become policy, and the Texas fight over new construction is the one to watch. Third, the numbers: chip earnings, hyperscaler spending plans and the Federal Reserve’s December decision, traders price in a more than 65 percent chance of a rate rise, will decide whether the economy underneath the market is as strong as the October jobs report suggested. The political fallout is still unfolding elsewhere too, from the Justice Department to the states where data centres are built. Until then, Friday’s bounce is a relief, not a verdict.