AI Stock Selloff Gains Steam on Election Fallout

US stocks tumbled Thursday as investors questioned the future of the artificial intelligence infrastructure buildout now that Democrats, riding a wave of discontent with data centers and AI, are poised to take both houses of Congress and key governorships across the country.

The Morningstar US Total Market Index was down more than 4% through midday, as the stocks that had run up on AI enthusiasm earlier this year crashed. The Morningstar US Large Cap Growth Index, in which the Magnificent Seven accounts for more than 50% of the portfolio, was down more than 5% midday.

Mega-cap tech stocks were all in the red on Thursday, with chip giants hit particularly hard. Advanced Micro Devices AMD and Micron MU were both down about 15% in recent trading. Nvidia NVDA shares fell more than 8%, erasing the stock’s gains since the start of the year, while rival Broadcom AVGO also dropped 8%. CoreWeave CRWV, the AI compute supplier whose surging debt yields helped revive Wall Street’s AI jitters last month, was down about 12%, trading just slightly above its March 2025 IPO price.

“Panicked investors are selling first and will ask questions later, as fears that newly elected Democratic governors in states with the greatest amount of new data center growth will implement new restrictions or regulations which will impede future growth,” says David Sekera, chief US market strategist for Morningstar.

The AI trade was already on uncertain footing. High-flying chip and memory stocks were well off their 2026 highs heading into this week. In recent weeks, earnings reports from hyperscalers like Alphabet GOOG/GOOGL and Amazon AMZN dented Wall Street’s enthusiasm for Big Tech’s aggressive investments in AI data centers.

Despite the AI trade’s recent weakness and Thursday’s carnage, the hardest-hit AI pick-and-shovel stocks have still seen extraordinary gains in 2026. Though Thursday’s slump put the stock down 50% over the past month, shares of memory supplier SanDisk SNDK are still up more than 250% this year. Fuel cell maker Bloom Energy BE, down more than 15% Thursday, is up more than 90% year-to-date, as is AMD. Micron shares have gained nearly 140%.

Thursday’s indiscriminate selloff could give way to a bifurcation of the AI trade. “We continue to expect that those companies at the forefront of AI technology will ultimately reap the benefits of AI,” says Sekera. “However, we also continue to believe stocks of commodity-oriented technology hardware companies that were able to benefit from short-term shortages ran too far, too fast, and that they have further to fall.”

Investors found few safe havens on Thursday. All 11 sectors were trading in the red. The Morningstar US Mega Cap Value Index, weighted heavily toward the financial and healthcare sectors, was down more than 2%.

Investors’ flight to safety was evident across asset classes. Treasury yields dropped sharply, with the 10-year yield sliding to 4.83%, near a two-month low. Gold futures, a traditional safe haven, rose nearly 1%. Risk assets like Bitcoin slumped, with the price of the world’s largest cryptocurrency falling below $76,000 from more than $80,000 overnight.