Tech Stocks Suffer Largest Selloff Since Covid Amid AI Datacenter Worries

Tech stocks suffered their biggest selloff since the Covid pandemic on Thursday as investors grew worried that the artificial intelligence datacenter boom might end prematurely.

The tech-heavy Nasdaq dropped more than 1,340 points, or 5.2%, during midday trading, losing more than $3 trillion in market value. Bloomberg data showed this was the index's largest daily drop since an April 2025 tariff announcement. The Philadelphia Semiconductor Sector index fell more than 1,000 points, heading for its largest single-day loss since March 2020.

Major technology companies experienced steep declines as a result. Meta fell 3.4%, Microsoft dropped 2.8%, and Nvidia dropped 8%. Chipmakers were hit even harder, with Micron and Advanced Micro Devices each sliding roughly 14%. Software firms, streaming platforms, and gig economy companies also saw their shares fall by multiple percentage points before the market closed.

This sudden market downturn reversed gains from Wednesday, which had followed midterm election results showing Democrats retaking control of the Senate and House of Representatives. Voters across the country approved candidates and ballot measures aimed at limiting the rapid construction of AI datacenters in the United States.

These political hurdles are already changing business expectations for the industry. Speaking at a Wall Street Journal conference on Wednesday, Meta President Dina Powell McCormick noted that building datacenters in the U.S. is becoming harder. She added that major cloud providers are now considering whether they need to build outside the United States to hedge their enormous investments.

Dan Ives, an analyst at Yorkville Ives, wrote in a note to investors that he now expects tech industry spending growth to peak next year instead of waiting until 2028 or 2029. Over the past two years, massive spending by tech giants on chips, land, energy, and construction has served as a major engine for the U.S. economy. However, Ives estimates that roughly 10% of planned U.S. AI datacenters will now be canceled, while up to 20% will face longer regulatory approval processes due to the political landscape, particularly in Texas.

Simeon Wallis, chief investment officer at Aprio Wealth Management, noted that uncertainty surrounding datacenter expansion in states like Texas, Georgia, and Ohio is driving worries about overall AI industry growth. He pointed out that this anxiety is showing up most clearly in semiconductor stocks, which benefited heavily from early infrastructure spending. While Wallis believes the market may be overreacting in the short term, the shifting conditions have clearly shaken investor confidence.

Summary

The sharp decline in tech stocks highlights how sensitive financial markets are to political and regulatory hurdles facing artificial intelligence infrastructure. As voters push back against datacenter construction and analysts scale back growth expectations, investors are suddenly reevaluating the future of the multi-billion-dollar AI boom.