Semiconductor Stocks Plunge 12% as Nasdaq Craters 5.5%
The U.S. Nasdaq index tumbled 5.5% in a single day, while the Philadelphia Semiconductor Index, a benchmark for semiconductor stocks, plunged 12%. The Dow fell 3.4% and the S&P 500 dropped 4.4% the same day. With the Nasdaq now down 10% from its October 6 peak, the index has entered a technical correction. All 11 U.S. market sectors finished lower, with the decline concentrated in semiconductors. Nebulous-class AI plays, AI power stocks, and hyperscalers also sold off in unison.
The slump came amid growing concerns that investment in AI data centers — massive computing facilities that underpin artificial intelligence services — could slow, after Democrats won control of both chambers of Congress in the U.S. midterm elections. "The three major New York indexes plunged on Nov. 5 (local time) as concerns converged over AI infrastructure regulation and a slowdown in data center construction following the midterm results," said Cho Yeon-ju, a researcher at NH Investment & Securities, in a report dated Nov. 6. "With fears already mounting over rising borrowing costs for AI investment and competition from Chinese semiconductors — stocks were already down roughly 20% from their June peak — the election outcome triggered an intensified sell-off," she explained.
The market's acute reaction stems from the post-2028 data center pipeline. Of the total 62.2GW of planned data center capacity slated for 2028, an estimated 32–33GW is now considered at risk due to the election outcome. Texas accounts for 18GW of the capacity exposed to delays, Ohio 5GW, and Georgia 3GW — together making up 82% of the total. Wells Fargo estimates that every 10% reduction in Texas's planned capacity would cut Big Tech's AI infrastructure spending by 1.6%.
However, Cho judged the sell-off to be an overreaction. "About three-quarters of the 33.8GW of new U.S. capacity planned for next year is already under construction," she noted, adding that "capacity not yet begun by 2028 will face only temporary delays, not outright cancellation." In Texas, she argued, there remains a gap between the newly elected governor Hinojosa's campaign pledge of a blanket permit moratorium and what the Republican-majority state Senate would realistically agree to.
The possibility of capacity relocation was also raised. "2028 pipeline capacity is likely to shift to Oklahoma, Florida, and Alabama, where moratorium-backed candidates were defeated," Cho analyzed, adding that the regulatory landscape is expected to take shape after an audit by ERCOT, Texas's grid operator, scheduled for mid-December. She advised monitoring AI data center bills and hearings in the new Congress in mid-January, as well as hyperscalers' capital expenditure guidance.
Analysts also characterized the plunge as the result of overlapping technical selling. "With the Nasdaq breaking below its 200-day moving average and the VIX volatility index spiking, algorithmic selling and hedge fund liquidations appear to have kicked in," said Cho of NH Investment & Securities.
