US Stock Markets Suffer Worst Rout Since 2020 as Nasdaq Plunges 6.4% Amid AI and Political Shifts

Wall Street suffered its worst stock market rout since March 2020, as a sharp selloff swept across major indices on Thursday, pulling down everything from high-profile chipmakers to defensive stocks. The downturn was heavily concentrated around companies central to the artificial intelligence boom.

The market slide followed the aftermath of Congressional elections that resulted in a sweeping victory for Democrats, a development that fueled investor concerns over potential political shifts. Specifically, market participants worried that new policies could tap the brakes on the industry's rapid growth and the billions of dollars being poured into computer equipment and data centers.

By the closing bell, the Nasdaq 100 Index dropped over 6%, marking its worst single-day decline since the height of the Covid-19 pandemic tailspin in March 2020. The index erased $2.3 trillion in market value, leaving it down nearly 15% from its record high on October 6. All 30 companies in the Dow Jones Industrial Average fell, with the Dow shedding 1,833 points, while the S&P 500 lost 4.4%.

Semiconductor stocks bore the brunt of the downturn. The Philadelphia Semiconductor Index tumbled 12% in its worst day since the start of the pandemic, pushing the benchmark into a bear market down over 38% from its June 22 peak. Nvidia Corp., the world's most valuable company, dropped over 9% in its deepest slide since January 2025, erasing its gains for the year. Other chip bellwethers like Intel Corp. and Advanced Micro Devices Inc. also experienced heavy losses.

Market volatility spiked sharply alongside the equity selloff. The Cboe Volatility Index (VIX) surged 11.57 points to close at 28.18, reaching its highest level since March. An exchange-traded fund tracking momentum-trading strategies dropped 8.2%, reflecting severe pressure as smaller hedge funds and pod shops were forced to unwind positions amidst a broader buyer's strike.

The downturn extended beyond large-cap technology firms to riskier market segments. A basket of unprofitable technology companies dropped 7.7%, while firms with fragile balance sheets and high debt loads fell about 4%. Additionally, the Russell 2000 Index of smaller companies dropped approximately 4.5%, pushing it into correction territory as higher interest costs weighed on sentiment.

"This massive market correction highlights the critical link between macroeconomic policy and high-growth technology sectors like artificial intelligence. When valuations are heavily tied to a single overarching theme, any shift in regulatory or political landscapes can trigger rapid unwinding by institutional investors. For founders and business leaders, this volatility serves as a reminder that capital markets can reprice growth expectations very quickly, making robust balance sheets and sustainable business models more essential than ever." — Dr. Shishir Gupta, Founder & CEO, StartupLanes