Chip Stocks Slide as Wall Street Reconsiders the AI Boom

A roughly 3% drop in the Nasdaq on Thursday erased the previous day’s rally and put chip and AI shares back under pressure. The sell-off followed Democrats’ midterm gains, as investors weighed whether huge spending on AI infrastructure would pay off. The Nasdaq Composite also entered correction territory, meaning it had fallen at least 10% from a recent high. ^2,3

The decline gained speed after chipmakers Qualcomm and Arm reported results investors saw as mixed. Qualcomm fell about 9% in early trading, while Arm dropped around 15%; Nvidia and AMD also slid, and the S&P 500 lost ground. These companies make chips and other equipment needed to train and run AI systems. Their shares had surged on hopes that growing demand would keep driving sales, but investors now want clearer proof that the spending will bring lasting profits. ^3,4

Those demands for proof meet a political risk: Democrats who won state and federal races have pledged to slow or halt data-centre construction, including in Texas, Ohio, Michigan and Georgia. That could threaten planned projects and supplier orders, although final decisions have not been made. At the same time, borrowing costs have weighed on companies that rent out computing power, and investors question whether costly AI tools can compete with cheaper open-source and Chinese models. The day’s economic reports offered no clear reason for a sell-off this steep. ^1,3

That uncertainty has spread beyond chipmakers. CoreWeave, which rents access to AI chips, fell, while gains at companies including AppLovin and Tapestry showed that not every stock lost ground. The next test is whether AI firms can show that their infrastructure spending is bringing in enough business, while elected officials decide how much to restrict new data centres. For now, the drop reflects doubt, not proof that the AI boom has ended. ^1,4