Nasdaq Plunges Over 5% Amid AI Chip Stock Sell-Off and Rising Oil Prices

Wall Street experienced a sharp downturn on Thursday, with the Nasdaq Composite index plummeting 5.3%. The S&P 500 fell 4%, and the Dow Jones Industrial Average dropped 3%. This significant decline occurred just one day after a rally following the US midterm elections, indicating a rapid shift in investor sentiment.

The Nasdaq's losses were led by AI chip and infrastructure stocks. Concerns about potential delays in data center construction are fueling fears that demand for related equipment and chips will be negatively impacted. The VIX, a measure of market volatility often called the "fear index," surged to over 27, signaling significant investor anxiety and anticipation of sharp market swings, though not yet extreme panic.

Chip stocks were particularly hard hit, with the semiconductor index falling approximately 7%. Micron Technology and AMD each dropped around 15%, Qualcomm lost about 10% following a disappointing smartphone chip sales forecast, and Nvidia declined by roughly 8.7%. AI infrastructure companies like Corvus and Nuvia also saw sell-offs, and computer and server manufacturer Dell fell over 13%. Conversely, Apple's stock surged about 28% on strong earnings reports.

Israeli companies Nova and Tower Semiconductor were also affected by the pressure on chip stocks, with Tower falling 8% and Nova down 6%. The potential slowdown in US data center construction, partly due to local opposition in some states and a Democratic victory in the midterms, raises questions about future investment in computing infrastructure. UBS strategists estimate that project delays could impact about 30% of planned capacity additions by 2028, potentially affecting a wide range of companies from chipmakers to power suppliers.

Adding to market stress, oil prices have rebounded after an 8% drop on Wednesday. The renewed volatility in energy prices reflects uncertainty surrounding the conflict with Iran and the possibility of diplomatic progress. Rising oil prices could exacerbate inflation concerns and complicate the Federal Reserve's efforts to lower interest rates. Investors are also awaiting the US employment report, due Friday, which could influence interest rate expectations.