Chip stocks crash $2 trillion on political, earnings and AI spending fears

Approximately $2 trillion in market value was wiped from US stocks during the first hour of trading on Thursday. The sell-off was led by chipmakers amid concerns that Democratic victories will curb the pace of America's AI data center expansion.

The S&P 500 dropped 1.8% within the initial half-hour, erasing the gain from Wednesdays—its strongest session in three months. Losses eventually exceed 3%, marking the steepest intraday decline since April 2025.

US equities on track for steepest decline since April 2025

Nasdaq -5.3% 🩸
S&P 500 -3.5% 🩸
Chip index -11.2%, worst since March 2020 🩸

— Wall St Engine (@wallstengine) November 5, 2026

The Nasdaq, packed with tech stocks, entered correction territory—at least 10% beneath its recent peak—while the Dow Jones Industrial Average dropped 1,000 points.

Why Is the US Stock Market Crashing Today?

Three simultaneous forces struck chip and AI stocks.

1. Democrats Threaten America's AI Data Center Boom

Control of both chambers of Congress went to Democrats on Tuesday, and the party also flipped governor races in Texas, Georgia, and Ohio.

Each of the incoming governors campaigned on slowing data center expansion. Gina Hinojosa, who defeated Governor Greg Abbott in Texas, vowed to halt new building permits and stop subsidies for major developers.

Keisha Lance Bottoms of Georgia pledged a statewide pause to examine the impact on electricity costs. In Ohio, Amy Acton is pushing for a ban on new projects unless developers cover all their utility expenses.

Texas is expected to host almost 30% of U.S. data center capacity by 2028, per a Bloom Energy report mentioned by Fortune. AI chips from Nvidia, AMD, and Broadcom are primarily purchased by these data centers.

“Tech needs to adjust and focus on a slower pace of this AI rollout,” Dan Ives, a longtime tech analyst at YorkVille Ives, told Fortune, as reported by the outlet.

2. Qualcomm's Phone Chip Sales Fell 26%

Late Wednesday, Qualcomm posted a 26% drop in handset chip revenue, landing at $5.14 billion and falling short of analyst expectations.

Phone prices have been climbing due to rising memory chip costs. Global smartphone shipments declined 20% in the September quarter, hitting a 14-year low, per Counterpoint Research.

Qualcomm's stock slid nearly 12% on Thursday, pulling down other chip companies.

“…margin outlook is lousy,” said Stacy Rasgon, analyst at Bernstrin.

3. AI Spending Doubts Were Already Building

Technology shares began the week on a negative note. In October, the Nasdaq-100 saw about $2 trillion in losses as market participants doubted the expense of AI, according to BeInCrypto.

Oracle and Marvell dropped Wednesday amid plans to finance their AI developments. Jim Cramer mentioned he was holding out for capituation before engaging tech buys.

Already concerned about AI expenditure returns, the market felt the weight of these data center commitments.

Which Stocks Are Falling the Most?

Semiconductor shares suffered the steepest declines in early action, according to TradingView. AMD declined close to 15%, while Qualcomm slid about 12%.

Micron dropped approximately 15%, Tesla around 10%, and Broadcom roughly 5%. Nvidia, America's biggest chip company, was between 7% and 8% down.

Cybersecurity stocks also took a blow. CrowdStrike and Palo Alto Networks each shed approximately 9%.

The losses extended abroad. South Korea's Kospi index, which counts memory makers Samsung and SK Hynix, dropped 5.3%, the Associated Press reported.

BeInCrypto had highlighted this danger in advance. On November 1, it noted that Jim Cramer identified the midterms as among three catalysts that might prolong the Nasdaq downturn.

Did the Treasury's $114 Billion Cash Injection Help?

The injection failed to halt the decline. The Treasury lowered its Federal Reserve cash balance by roughly $114 billion from October 27 through November 3, according to daily Treasury figures.

BREAKING: The US Treasury has channeled $114 billion into financial markets over a 10-day period as its TGA balance declines. Historically, increased cash in the banking system has been bullish for equities.

— Bull Theory (@BulTheoryio) November 5, 2026

That money flows into bank reserves. The bulk was ordinary, including around $87 billion in Medicare payments on October 30 by itself.

The funds could also return. The Treasury anticipates its balance dropping to $850 billion by the end of the year, then climbing to $1 trillion by March.

Is the AI Trade Over?

Some disagree with that view. Fundstrat's Tom Lee described the decline in data center and AI stocks as a short-term move, according to Stocktwits. He believes states will continue attracting investment, but under more demanding conditions.

Qualcomm provided a contrasting perspective. CEO Cristiano Amon stated that Android handset sales had reached a bottom, and the firm forecast data center revenue of $650 million for the next quarter, topping expectations.

The same dynamics apply to crypto. On October 30, BeInCrypto coverage noted Deutsche Bank's caution that an AI exodus could drag down U.S. equities and the dollar, posing threats to Bitcoin (BTC) and gold.

The next major event is on Friday. Jim Cramer has flagged the October jobs data as the true examination for the midterm rally, and Thursday's declines have already wiped that rally out.