Tech stocks plunge amid concerns over AI data center expansion

The Nasdaq Composite index experienced a sharp decline, dropping over 1,340 points, or 5.2%, in midday trading. This resulted in a loss of over $3 trillion in market capitalization, marking the index’s largest single-day decrease since April 2025, according to Bloomberg data. The Philadelphia Semiconductor Sector index also suffered a substantial loss, falling by more than 1,000 points, potentially its worst daily performance since March 2020.

Major tech companies were notably affected, with Meta experiencing a 3.4% decrease, Microsoft down 2.8%, and Nvidia plummeting 8%.

Thursday’s market downturn reversed Wednesday’s rally, which followed the Democratic Party’s gains in the Senate and House of Representatives. Voters demonstrated a clear desire to limit the construction of AI data centers across the United States.

Meta President Dina Powell McCormick addressed the evolving landscape at a Wall Street Journal conference on Wednesday, acknowledging the challenges ahead. She stated, “Building data centers in the U.S. is going to be harder.” She added, “I can also tell you that every hyperscaler is now thinking about ‘Do we need to build outside the United States?’ Because they’re enormous investments, hedging those investments is a wise thing to do.”

Dan Ives, an analyst at Yorkville Ives, revised his projections, now anticipating that the tech industry’s capital expenditure growth will peak next year, a shift from previous estimates of 2028 or 2029.

This surge in capital expenditure has fueled the U.S. economy over the past two years, as companies including Alphabet, Microsoft, Amazon, Meta, and Oracle, along with emerging neocloud providers, invested heavily in data centers to support AI services. These investments encompass chips, computers, networking equipment, land, energy, and construction.

“While Big Tech and hyperscaler capex should still easily exceed $1 trillion in 2027 the growth rate into 2028 will clearly moderate significantly as the data center buildout comes at a much slower pace given the political map especially in the state of Texas,” Ives wrote.

He further estimated that “We estimate on the low end 10% of the planned 800-1,000 AI focused data centers in the US will now be wiped off the roadmap, with potentially up to 20% of these facing a much longer regulatory road that could further impact the capacity buildout in the US over the next few years.”

Chip manufacturers were among the hardest hit, with Micron, a leading memory chip producer, declining roughly 14%, and AMD, a competitor to Nvidia, also experiencing a 14% drop.

Neocloud companies, which have accumulated significant debt to construct data centers competing with Amazon and Google, were particularly vulnerable. Coreweave, a prominent neocloud company, fell 9% on Thursday, marking an 18% decline over two days.

Google, a major cloud provider with a substantial search advertising business, saw a more modest decline of 1.6% on Thursday.