The Nasdaq Composite lost 5.5% on Thursday, its worst session in 19 months. SanDisk fell 22%. Western Digital shed 17%. By Friday morning the damage had crossed oceans: Japan's Nikkei 225 sank 6%, South Korea's Kospi dropped more than 6.5%, and London's FTSE 100 was for a time heading for its ugliest day since March. The trigger, by most accounts, was the Democrats' decisive midterm victory. Why that should hit chip makers and hard drive suppliers so hard is the question now occupying trading floors.
Investors fear the AI sell-off is really a bet on policy: that a Congress controlled by Democrats will slow the construction of data centers, and with it the spending that has carried much of this year's market. Beyond that, the picture gets messier.
A rout that traveled
As The Guardian reported, the selling moved from Wall Street to Asia and then to Europe. The FTSE 100 was down as much as 2.35% at its worst, at 10,528 points, before recovering to a 1% loss by the close. Germany's Dax finished 2% lower, France's Cac 40 fell 0.8% and Spain's Ibex gave up 0.6%. The Vix, Wall Street's gauge of expected volatility, jumped more than 60%, reaching a level that had not been seen since the opening stretch of the Iran war.
The damage showed up in brokerage back offices too. Christopher Forbes of CMC Markets described clients who had been long indexes and long stocks being swept out overnight, with margin calls and complaints arriving around the clock. "It's actually a bit of a disaster," he said. Borrowed money is what turns a bad day into a forced one, so a fair share of Thursday's selling was probably not conviction at all.
Friday brought a partial reprieve. The S&P 500 rose 0.3% and the Nasdaq closed up 1%, which recovered only a slice of what it had lost. Helping the mood was a jobs report showing the US economy added 165,000 positions in October, with unemployment falling to 4.1%. A labor market that strong is not the backdrop of a recession, whatever the tech tape says.
Why data centers carry the argument
Susannah Streeter of Wealth Club put the worry plainly: a slower data center build-out threatens the spending spree under the boom just as investors are getting anxious about what that spending will earn. Jim Cramer, speaking at his Investing Club's annual meeting at the New York Stock Exchange, went further, saying the result of the election had stabbed the bulls where it hurt, the multi-trillion-dollar buildout.
His sharper point concerned repair. When tariff announcements crushed stocks in April 2025, the president softened his stance and a sharp rebound followed. This time, Cramer argued, the threat to the market's main growth engine may not be reversible by one person changing his mind. Legislation, permitting and tax treatment move slowly, and so do the markets that try to price them.
Not everyone buys the bleakest reading. Mohit Kumar, an economist at Jefferies, doesn't expect a fast US rebound but rejects the idea that this is the start of an unwinding of the AI trade. His reasoning is political and practical: data centers create jobs, and Democrats, he suggests, won't want those jobs migrating to other states or abroad. It sounds plausible, though nobody has tested it, since the new Congress hasn't yet shown what it intends to do.
Signals outside the stock tickers
The cleanest read on how deep the worry runs may sit away from equities. Copper, a staple of chips, electronics and cars, was headed for its steepest weekly drop since March on the London Metal Exchange, down about 2.8% for the week on the three-month benchmark. Craig Lang of the consultancy CRU said the metal's price now responds increasingly to sentiment about data center expansion. A commodity once governed by Chinese construction and Western factories is being tugged by server-farm forecasts, which is a strange thing to write about a metal humans have been smelting for millennia.
Oil is the second thing to watch. Chris Beauchamp of IG pointed to nervousness over a possible resumption of the Iran conflict and over crude's slide earlier in the week. Cramer, for his part, sees falling oil as a tailwind for FedEx, which he said he'd buy. He also favored defensive names such as Johnson & Johnson, Eli Lilly and Kimberly-Clark, and said his club has trimmed or exited AI-linked holdings including Arm, Corning and Broadcom. That is one commentator's positioning, not a forecast, but it shows where cautious money is drifting.
Perspective, and what comes next
A calm look at the year complicates the panic. The Nasdaq is still up 6.35% since January, though more than 10% under its peak. London's blue-chip index, meanwhile, is ahead by nearly 7.5% for 2026, yet it trades about 300 points short of the record it set in July. Nobody who bought in January is underwater. Plenty who bought in the autumn are, and some of them may be the ones fielding those margin calls.
So the economy and the market are sending different messages. Hiring is solid, while equity prices say the main source of growth may be about to lose a patron. Both can't be fully right for long.
Three things will settle it. The first is any early signal from the incoming Congress on data center incentives, power access or chip policy. The second is whether big technology companies, with earnings and capital plans ahead, trim or defend their building budgets. The third is whether copper and oil keep falling, which would suggest the market sees something broader than a bad week for chip stocks. Until one of those speaks clearly, expect volatility to stay elevated.