November 6, 2026, (Inside AI) — The Nasdaq plunged 5.5% on Thursday, its steepest one-day decline in 19 months, as investors fled chipmakers and data center stocks on fears that a Democratic-controlled Congress will push through tougher AI regulations. The tech-heavy index has now lost nearly 12% from its record close a month ago, entering correction territory. The Dow fell almost 3.5% and the S&P 500 dropped more than 4%, wiping trillions in market value.
The selloff marks a sharp reversal for a sector that had rallied on AI optimism. It also signals that political risk has become a major factor for AI-related stocks, which had largely been insulated from regulatory concerns. The fear gauge, the VIX index, posted its largest increase since December 2024.
Among individual movers, Nvidia dropped over 9%, while Qualcomm fell 9.5% after missing Wall Street estimates for fourth-quarter smartphone chip sales. Data center companies IREN and Applied Digital fell more than 14%, and CoreWeave dropped almost 10%. SpaceX, Elon Musk's rocket company, fell 9%, extending recent losses.
But not everyone sees a crisis. Brad Conger, chief investment officer at Hirtle & Co., called the plunge a "tempest in a teapot" and said it created a buying opportunity.
"For long-term investors, today's move is great news. And we bought stocks because they have become a lot cheaper over the course of the year. We came into the year with the US market on twenty-two-and-a-half times earnings. We are now closer to eighteen times earnings. And so I think if you have a medium-term perspective, two to five years, you'll be rewarded leaning into risk in markets like today's." — Brad Conger, chief investment officer, Hirtle & Co.
The selloff was fueled by chipmakers, which sank on fears of tougher AI regulation after Democrats won control of Congress. The election results, though not detailed in the source, have shifted the political landscape for AI oversight. Investors fear that a Democratic Congress could push for stricter rules on AI development, data privacy, and chip exports, potentially hurting companies that have benefited from the AI boom.
This is not the first time AI stocks have reacted to political news. In recent years, the sector has been sensitive to regulatory headlines, but the magnitude of Thursday's drop suggests that investors are now pricing in a higher probability of restrictive legislation. The Nasdaq's 12% decline from its peak is a correction, but it remains to be seen whether it will deepen into a bear market.
For context, the last time the Nasdaq fell this sharply in a single day was in March 2025, when concerns about AI chip export controls rattled markets. That selloff was short-lived, with the index recovering within weeks. Whether history repeats will depend on how quickly Congress moves on AI regulation and how companies adapt.
Conger's view is that the market has already priced in much of the risk. He noted that the US market's price-to-earnings ratio has fallen from 22.5 times to around 18 times, making stocks more attractive for long-term investors. But other analysts warn that the regulatory overhang could persist, especially if Congress focuses on antitrust actions against big tech firms or restricts AI research.
The selloff also hit data center companies hard, reflecting concerns that stricter regulations could slow the buildout of AI infrastructure. Companies like IREN and Applied Digital are heavily invested in AI computing, and any slowdown in AI spending would hurt their growth prospects. CoreWeave, a cloud computing provider that has benefited from AI demand, also fell sharply.
Qualcomm's decline came after the company reported weaker-than-expected smartphone chip sales, highlighting the cyclical nature of the semiconductor industry. The broader chip sector has been under pressure from slowing demand for consumer electronics, and AI has been a bright spot. But if regulations curtail AI development, that bright spot could dim.
SpaceX's 9% drop is notable because the company is not directly involved in AI, but it has been caught up in the tech selloff. The company's valuation has soared in recent years, and any pullback in tech stocks could affect its prospects for future funding.
Read: AI Lost Big in the Midterms. What Does That Mean for Your Business?
As investors digest the election results and the implications for AI regulation, the coming weeks will be crucial. Earnings reports from major tech companies and any signals from Congress on its legislative priorities will shape market sentiment. For now, the Nasdaq's correction serves as a reminder that political risk is back on the menu for AI stocks.
Sofia spent years studying how machines parse human language before pivoting to cover the systems now rewriting it. She reads technical papers the way others read news and looking for what the numbers are actually saying beneath the headlines.
