Wall Street has lost $5.7 trillion in market value since its October 6 peak, as months of unease over the artificial intelligence boom erupted into a global market rout this week — and then a surprisingly strong jobs report steadied nerves on Friday.
By Thursday's close, the US stock market had shed $5.7 trillion from its early-October high, according to an index tracking total US equity market capitalisation, Bloomberg reported. The selloff, driven by fears that the Democrats' midterm sweep will slow the AI buildout, spread from New York to Tokyo before chipmakers led a partial recovery on Friday.
Photo: Arild Vågen / Wikimedia Commons, CC BY-SA 4.0
Thursday's $2.3 trillion wipeout
Thursday was the worst day of the rout. The Nasdaq 100 lost $2.3 trillion in a single session, and by the close 57 percent of its constituents had fallen at least 20 percent from their highs — a larger share than when the index itself entered a bear market in March 2022.
The tech-heavy Nasdaq fell 5.5 percent on Thursday, its deepest one-day drop in 19 months, while the S&P 500 dropped 4.4 percent. The seven largest US technology stocks, the so-called Magnificent Seven — including Apple, Nvidia and Tesla — lost more than $1 trillion in market value in a single trading day, the BBC reported.
The damage spread overseas on Friday. Japan's Nikkei 225 fell 6 percent, its worst one-day fall since the United States announced its "Liberation Day" tariffs in April 2025, leaving the index down 9 percent on the week and 20 percent from its June peak. Memory-chip makers SK Hynix and Samsung Electronics, which make up nearly half of South Korea's Kospi index, fell 10 percent and 6 percent respectively.
Why investors are dumping AI stocks
The worries have been building all year: stretched valuations, mounting debt, and doubts about the payoff from trillions of dollars in AI spending, which some estimates put above $10 trillion between 2025 and 2032. The midterm results lit the fuse.
Investors fear the Democratic sweep of Congress — and Democratic wins at the state and local level — will bring tighter regulation of artificial intelligence and slow the breakneck buildout of AI data centers. Goldman Sachs economists said the state-level results alone could lead to short-term pauses in data-center approvals affecting up to 45 percent of planned capacity expansion.
Hedge funds have been cutting risk fast. Morgan Stanley data show they have reduced gross leverage from its June peak by the most in more than a decade. And with the Federal Reserve raising rates again in September, the cheap-money tailwind that helped lift AI stocks has faded.
Friday rebound and the jobs report
Friday brought relief. The Nasdaq rose 1.1 percent and the S&P 500 added 0.31 percent, lifted by a rebound in chipmakers such as Nvidia and AMD, although the Dow Jones Industrial Average slipped 0.46 percent.
The spark was the October jobs report. The US economy added 165,000 jobs in October, nearly three times the roughly 59,000 forecast by economists surveyed by Dow Jones, and the unemployment rate dipped to 4.1 percent from 4.2 percent. Hiring was broad, led by healthcare and professional and business services, and the August and September figures were revised up by a combined 84,000 jobs. Average hourly earnings rose 3.1 percent from a year earlier.
The strong data reinforced bets that the Federal Reserve will raise interest rates again at its December 9 meeting. The Fed lifted its benchmark rate by a quarter of a percentage point in September, to a range of 3.75 to 4.00 percent, and traders now put the odds of another quarter-point hike in December above 76 percent, according to the CME FedWatch tool. The yield on the 10-year Treasury note rose to 4.855 percent, while the two-year yield climbed to 4.512 percent.
What comes next
Whether this week's rout marks a lasting turn or another buying opportunity is the question hanging over Wall Street. History offers some comfort to bulls: the S&P 500 has risen in the 12 months after every midterm election since 1950, gaining around 15 percent on average, according to Deutsche Bank data cited by Reuters.
But this time may be different. The market is still only about 5 percent below its all-time high even after the selloff, the AI spending boom depends on debt-fuelled investment, and a Democratic Congress is expected to scrutinise both. Tuesday's inflation report is the next big test: if prices run hot, the odds of a December rate hike — and more pressure on stocks — will climb further.
Sources: Bloomberg, Reuters, Deutsche Welle, BBC, Bangkok Post.