A Democratic midterm sweep triggered a Nasdaq plunge of more than 5% — its worst day in 19 months — hammering AI and semiconductor stocks while casting doubt on Anthropic's IPO valuation, which investors now peg well below the company's $2 trillion target.
A Democratic sweep of the House and Senate during Tuesday's midterm elections sent AI and semiconductor stocks sharply lower this week, rattling investor confidence in the data center buildout and casting a shadow over Anthropic's imminent IPO.
The Nasdaq fell more than 5% on Thursday — its steepest single-day drop in 19 months — as investors reassessed the regulatory and political risks facing artificial intelligence infrastructure. By Friday, markets had partially recovered, though analysts cautioned that the rebound may not hold.
Nvidia shed 9.3% on Thursday, while AMD fell 17.3%, Micron 17.5%, Broadcom 10.4%, Tesla 10.8%, SpaceX 9.1%, and Microsoft 3.6%. Neoclouds, which provide AI computing capacity and are central to major data center projects, were also hard hit: Nebius dropped 15%, Iren fell 17%, and CoreWeave declined 10%.
The sell-off compounded an already difficult stretch for the AI trade. Chipmakers, neoclouds, and data center-related companies had already sold off in October on concerns about rising interest rates and capital spending, with the Nasdaq suffering its worst month that period since March 2025.
"The tumble in tech stocks that took hold in the immediate aftermath of the US midterm elections resumed as investors contemplated what a Democrat-controlled Congress may mean for tech regulation and the overall AI boom," wrote Kyle Rodda, senior financial market analyst at Capital.com, in a note Thursday after the bell.
The election results landed on a sector already facing structural pressure. Between January 2024 and May 2026, at least 46 AI data center projects across 20 U.S. states, representing more than $170 billion in announced investment, were blocked, withdrawn, or stalled following community opposition, according to research by the International Data Center Authority. Dozens of additional local ballot measures in 10 states sought to restrict new data center construction.
Dan Ives, partner at Yorkville Ives & Co., said in a Wednesday note that the midterm outcomes would directly slow the pace of an estimated 800 to 1,000 planned data centers across the country. "Democrats taking control, particularly over the Senate, will create some major hurdles for AI over the next two years," he added.
Ives subsequently revised his outlook on Big Tech capital expenditure, writing that he now believes "Big Tech capex growth rate now peaks in 2027 vs our previous view that would not happen until 2028/2029."
Dominique Toublan, head of U.S. credit strategy at Barclays Investment Bank, offered a less categorical read. "AI pushback is bipartisan but local, making the buildout pricier rather than stalling it," Toublan wrote. "The AI race shifts from a prisoner's dilemma to a war of attrition: scarce power favors the biggest balance sheets."
Goldman Sachs estimates that AI-related capital spending could total approximately $7.6 trillion from 2026 through 2031 across computing, data centers, and power — a figure that now faces heightened uncertainty.
Amid the turbulence, Anthropic's planned IPO is under fresh scrutiny. The AI company had been targeting a valuation of up to $2 trillion when it filed confidentially with the SEC, but investors now say even $1.5 trillion is in doubt. One investor told CNBC the number is a "stretch," with a more likely range of $1 trillion to $1.25 trillion, depending on market conditions. As of May, Anthropic had been privately valued at $965 billion. The company declined to comment.
Gil Luria, an analyst at D.A. Davidson, said in a statement to CNBC that "investors will expect the IPO to be priced at least at the low end of previous expectations," adding that the deal needs to be priced well to set Anthropic up for success. Anthropic, which is set to list on the Nasdaq under the ticker ANT, is expected to kick off its roadshow next week.
Earnings from neoclouds CoreWeave and Nebius — both scheduled to report in the week ahead — will offer the next major test of investor sentiment toward AI infrastructure, with analysts watching closely for signs of new orders, project timelines, and borrowing cost management.
Sara Montes de Oca is the Editor in Chief of TechEchelon. Previously a correspondent and producer in Washington, D.C., covering business, finance, and politics.
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