The Whole AI Trade Falls; Chips Lose 12 Percent

NEW YORK, Nov. 5 — OnOn Wednesday, Wall Street split the trade in artificial intelligence in two; on Thursday it sold the whole of it. The PHLX Semiconductor index fell 12.25 percent. The Nasdaq Composite lost 5.52 percent, the S&P 500 4.36 percent and the Dow Jones industrial average 3.44 percent, each its steepest one-day fall since April 4, 2025, CNBC reported.

The cloud companies that had rallied on Wednesday fell too, if by less; the heaviest losses fell on makers of chips, memory and optical parts. Astera Labs fell 19.62 percent, Lumentum 18.68 percent, Micron 17.46 percent and AMD 17.26 percent.The SuppliersAstera Labs sells copper and optical connectivity for “rack-scale AI”; Lumentum makes optical and photonic parts for cloud networking, among other uses; Micron makes memory and storage, by the companies’ own descriptions. Marvell lost 16.43 percent and Lam Research 16.36 percent. Nebius fell 14.94 percent, and Vertiv, after losing 12.89 percent on Wednesday, another 14.02 percent. Broadcom fell 10.43 percent and TSMC’s American shares 10.78 percent.

Microsoft, up 6.68 percent on Wednesday, lost 3.58 percent on Thursday; Amazon, up 6.12 percent, lost 2.19 percent; and Alphabet, up 3.18 percent, lost 2.20 percent. Apple fell 1.53 percent and Meta 3.96 percent. The power producers that sold off on Wednesday lost less this time: Constellation Energy fell 2.47 percent, Talen Energy 3.23 percent and Vistra, after Wednesday’s 13.83 percent, 6.15 percent.

By CNBC’s count, the S&P 500’s information technology sector fell 7.30 percent, its worst day since March 16, 2020, and all 11 of the index’s sectors fell. The “Magnificent Seven” lost more than $1 trillion of market value between them, Nvidia more than $440 billion of it, CNBC reported. Nvidia fell 9.26 percent, to $181.60, which left it down 2.6 percent for the year.NVDANasdaq178.67▼7.97−4.3%Nvidia · Monday’s session The Nasdaq closed more than 11 percent below the record it set in October, CNBC reported: a correction, in Wall Street’s terms.The Fear GaugeThe Cboe Volatility index, or VIX, rose 11.57 points, its biggest gain in points since April 4, 2025, CNBC reported. On the New York Stock Exchange, 2,344 stocks fell and 416 rose.

Bonds went the other way. The 10-year Treasury yield fell to 4.84 percent from 4.90 percent, and the two-year yield to 4.46 percent from 4.58 percent, by the Treasury’s count.

The Reasons

Worries about a slowdown in data-center construction, after big Democratic wins in the House, the Senate and key governorships on Tuesday, hit the market, CNBC reported. Democrats won control of both chambers of Congress, The Associated Press reported, and in Texas Gina Hinojosa was elected the state’s first Democratic governor in more than 30 years, the AP reported. She had campaigned on an immediate moratorium on data-center development, CNBC wrote. In a CNN interview on Thursday evening she said, as CNBC quoted her, “We need to stop what we are doing with data centers until we have measures to protect Texans.” She also said Texas could keep a “strong working relationship” with Elon Musk and his companies, with deals done “on our terms,” CNBC reported.

President Trump put the day down to the vote. “The Stock Market suffered one of the Worst Days in History based on the results of the Election,” he wrote on Truth Social late Thursday, as CNBC reported. On Friday morning he said he was in favor of the build-out of artificial intelligence and would work with any state that wants to help it grow, CNBC reported, and wrote: “They are GOLD, and only foolish leadership will say ‘NO’ to the riches they bring!”

Stuart Clark, a portfolio manager at Quilter, pointed to how narrow the market had become. “The scale of the falls in some of the market’s biggest names has been striking. But it also highlights the concentration risk that has built up in U.S. equity markets,” he said by email, as CNBC reported.

William de Gale, co-founder and lead portfolio manager at Blue Box Asset Management, told CNBC’s “Squawk Box Europe” that investors were cutting their growth expectations, not their view of demand. Investors’ models, he said, have “30% top line growth in them, going many years into the future, and nothing that big can grow that fast very long,” so they must come down to 15 to 20 percent. “I don’t think there’s any real issue with demand.”

I don’t think there’s any real issue with demand.

History offers some comfort, and a warning. Across 10 earlier Nasdaq corrections over the past decade, the index gained an average of 9.41 percent in the three months after it entered correction territory, by CNBC’s table; after the correction of January 2022, it fell another 18.3 percent over six months.

Asia, Friday

On Friday the selling reached Asia: Seoul’s Kospi fell 6.02 percent, to 5,059.69, after a plunge soon after the open tripped a circuit breaker, and Tokyo’s Nikkei 225 lost 5.96 percent, to 57,434.77. At its low the Kospi was down 8.78 percent, at 4,911.28, the Korea Herald reported; trading was halted for 20 minutes, AFP reported. SK hynix fell 10.44 percent, to 1.132 million won, and Samsung Electronics 6.35 percent, to 188,700 won. Foreign investors sold a net 2.77 trillion won of shares.Bear MarketsFriday’s fall took the Nikkei into a bear market, more than 20 percent below its June peak, CNBC reported; the Taiex entered one too.

In Taipei the Taiex fell 4.51 percent, to 39,701.64, its fourth-largest one-day fall in points, Taiwan’s Central News Agency reported. TSMC, more than 40 percent of the market’s value, fell by its 10 percent daily limit before closing 4.69 percent lower, at NT$2,135. Buyers came back around noon, said Adam Lin, an analyst at Moore Securities Investment Consulting, after the Financial Supervisory Commission said it would meet to discuss possible measures to support the market; the committee overseeing the National Financial Stabilization Fund said it could hold a special meeting on whether the fund should step in, CNA reported.

Analysts in Seoul thought the fear overdone. “The likelihood of AI data center construction coming to a complete halt is limited, and we believe market concerns are overblown,” Lee Kyung-min of Daishin Securities said, as the Korea Herald reported. He put the chance of new project suspensions in Texas, Georgia and Ohio at 15 to 30 percent.

Before the Open

By 7:41 a.m. in New York, Nasdaq-100 futures were up 1.6 percent and S&P 500 futures 0.3 percent, while Dow futures were down 444 points, or 0.9 percent, CNBC reported. In trading before the open, in trades between 7:17 and 7:19 a.m., Nebius was up 10.49 percent, Astera Labs 9.76 percent, Micron 8.46 percent and AMD 7.67 percent, and Nvidia was up 3.97 percent, at $188.81. Microsoft was down 0.97 percent and Apple 1.24 percent. Cloudflare, which reported its quarter after Thursday’s close, was up 19.89 percent.

At 8:30 a.m. the Bureau of Labor Statistics reported that payrolls rose by 165,000 in October and that the unemployment rate was little changed, at 4.1 percent.

IREN, an AI cloud company, reported its quarter after Thursday’s close. The next tests come soon: CoreWeave reports on Tuesday, Nov. 10, and Nvidia on Nov. 17. In Taipei, Mr. Lin had one more thing to watch. “Pay close attention to what the FSC will come up with to support the market,” he said.