US stocks dropped sharply on Thursday, with the Nasdaq poised to confirm correction territory as steep losses in chip and data centre-related stocks weighed a day after the Democrats’ sweeping midterm election victory powered a broad-based rally.
Qualcomm slid 9% after the chipmaker fell short of Wall Street estimates for fourth-quarter smartphone chip sales on sluggish demand and declining Apple-related revenue.
The broader semiconductor index extended declines and was down 7.1%, with losses in Nvidia, Advanced Micro Devices, Intel and Marvell Technology weighing heavily.
Chip stocks, along with companies linked to the AI infrastructure buildout, slipped further after the Democrats’ election victory, including in some key data centre states, where public opposition to the industry’s rapid expansion has been growing.
“There is now a chance that the two years of extra push from the Trump government for AI buildout will somehow be scaled back because there has been a lot about the AI trade that has been ignored by the current administration,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“We suspect there is going to be some scrutiny on this aggressive AI buildout.”
Data centre operators IREN, Hut 8, and Applied Digital fell between 6% and 11%. Neoclouds CoreWeave and Nebius Group shed 9.3% and 13.4%.
Utilities and equipment suppliers exposed to the data centre boom, including GE Vernova and Constellation Energy, were also trading lower. AI server maker Dell dropped 10.5%.
Most large-cap tech stocks also lost ground after Wednesday’s rally. Meta Platforms slid 3.4%, while Amazon.com and Alphabet were slightly lower.
Elon Musk-led Tesla tumbled 9.5% and SpaceX eased 6.7%, extending losses. Musk spent nearly half-a-billion dollars backing Republican candidates, including efforts to keep them in control in Texas, the home state of both companies.
At 9:57am ET, the Dow Jones industrial average fell 351.87 points, or 0.66%, to 53,004.25, the S&P 500 lost 127.74 points, or 1.66%, to 7,560.88 and the Nasdaq Composite lost 795.08 points, or 3.09%, to 24,941.44.
Five of 11 major S&P 500 sectors were in negative territory, with the tech sector and consumer discretionary leading losses, while energy gained the most.
The benchmark clocked its biggest one-day percentage gain in three months on Wednesday as the easing political uncertainty boosted risk appetite.
Some analysts said that a divided government in Washington could lead to fewer sharp legislative changes and may even make it harder to agree on fiscal spending, given the US’s deteriorating fiscal picture. A sharp drop in oil prices had also aided sentiment.
Central banks around the world have acknowledged inflation remains elevated as crude oil prices surged due to the Middle East conflict.
Cleveland Federal Reserve president Beth Hammack, in comments on Thursday, favoured a gradual rate-hike path to lower inflation.
Focus will be on the US October non-farm payrolls data due Friday, as traders currently expect the Fed to hike rates next month following the September rate hike.
Among other stocks, Snapchat owner Snap slid 12% after missing third-quarter revenue estimates, while AppLovin jumped 32% after the marketing platform beat third-quarter profit estimates.
Declining issues outnumbered advancers by a 1.36-to-1 ratio on the NYSE and by a 2.17-to-1 ratio on the Nasdaq.
The S&P 500 posted 69 new 52-week highs and three new lows, while the Nasdaq Composite recorded 132 new highs and 247 new lows.
Reuters
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