AI Chip Sell-Off: Why Nvidia Fell 9% and the Nasdaq Had Its Worst Day Since 2025

The AI chip sell-off hit Wall Street hard on Thursday, 5 November. Nvidia lost more than 9% of its value, wiping almost $450 billion off the world's most valuable chipmaker in a single session. The sell-off dragged the tech-heavy Nasdaq Composite down 5.5%, its worst day since April 2025, and pushed it into a correction, more than 10% below its record high of 6 October.

It was not only Nvidia. Qualcomm also fell more than 9% after a weak forecast, while AMD, Micron and Applied Materials each suffered double-digit losses. By Friday morning the rout had spread to Asia and then London.

Here is what caused the AI chip sell-off, why investors suddenly turned on the AI trade, and what to watch next.

The numbers at a glance

Market	Thursday 5 November
Nasdaq Composite	down 5.5%, closed at about 24,315
S&P 500	down about 4.4%, worst day since April 2025
Dow Jones	down about 1,830 points (3.4%)
Nvidia	down more than 9%, almost $450bn wiped off
Qualcomm	down more than 9%
AMD, Micron, Applied Materials	double-digit falls
Alphabet, Amazon, Meta, Microsoft	down 2% to 4%

Estimates of the total value lost across US shares range from about $2.5 trillion to $3 trillion. Every one of the S&P 500's eleven sectors finished lower.

What caused the AI chip sell-off: the midterms

The trigger was the result of Tuesday's US midterm elections. Democrats won control of Congress, and investors quickly started asking what that means for the enormous AI building programme that has powered the stock market for three years.

That programme depends on data centres: vast, power-hungry buildings full of Nvidia chips. Two things in the election results worried the market:

• Voters turned against data centres locally. According to CNBC, voters in 41 local ballot measures across 10 states mostly sided against data centre construction, with Harwood, North Dakota the only exception.
• The states with the biggest AI plans turned blue. A Democratic Congress and new state leaders could mean tighter rules on planning, power use and water, and more questions about who pays for new grid capacity.

Meta's president, Dina Powell McCormick, said this week that building data centres is "going to be harder" after the elections. When the companies writing the biggest cheques say that, the companies selling them chips feel it first.

Who pays for the AI build-out?

The election was the spark, but the worry about money had been building for weeks.

The biggest cloud companies (Microsoft, Alphabet, Amazon and Meta) plan to spend well over $100 billion a year each on AI infrastructure. CNBC reports that Meta's free cash flow turned negative last quarter, after Alphabet and Amazon did the same the quarter before. In other words, they are spending more than they bring in, and borrowing to cover the gap.

On Monday, 2 November, Melius Research analyst Ben Reitzes cut his Nvidia price target from $420 to $315, while keeping a Buy rating. His concern was not demand for chips but the amount of debt and new shares needed to fund the build-out, which he expects to weigh on valuations through 2028. Melius also cut targets for AMD, Broadcom, Marvell, Dell, Qualcomm and CoreWeave.

Rising interest rates make that borrowing dearer. CNBC summed up the market's fear as too much debt and too little revenue.

Qualcomm made a bad day worse

Qualcomm reported results after the US market closed on 4 November and gave a disappointing forecast for the current quarter. Its handset chip revenue fell 26%.

Chief executive Cristiano Amon blamed a global shortage of memory chips rather than weak demand: "We don't have a demand issue; it's a supply issue." The memory squeeze is pushing up prices and making supply harder to get for Qualcomm, Intel and AMD. Investors took that as another sign that the AI boom is hitting physical limits.

The sell-off spreads to Asia and London

The falls rolled around the world on Friday, 6 November:

• Japan: the Nikkei fell about 6%.
• South Korea: the Kospi dropped sharply, led by memory makers Samsung and SK Hynix.
• Taiwan: home of the world's biggest chip factories, the market fell more than 8% by some reports.
• UK: the FTSE 100 fell between 1.5% and 2% in early trading, according to different reports.

The FTSE 100 holds up better than Wall Street in a tech sell-off because it has few technology companies. It is dominated by banks, oil, mining and consumer goods. Even so, many UK pension funds and ISAs track global indices in which US tech giants are the largest holdings, so British savers will feel this week's falls.

There were signs of calm by Friday morning in New York. US chip stocks pointed sharply higher before the opening bell, with the iShares Semiconductor ETF up nearly 5% in pre-market trading.

Is the AI chip sell-off the end of the AI boom?

Not on the evidence of one day. The companies at the centre of the sell-off are still reporting strong sales: AMD says its data centre sales more than doubled, and Intel reported a 78% jump in data centre revenue. Qualcomm says it is short of supply, not customers.

What has changed is the mood. For most of the past three years, investors paid almost any price for AI growth. This week they started to price in the risks: political opposition to data centres, the cost of borrowing, and shortages of power and memory chips.

Richard Clode, a portfolio manager at Janus Henderson, told CNBC: "There's going to be a knee-jerk reaction, and that could lead to some delays." Delays, rather than cancellations, is how much of the industry is describing it for now.

What to watch next

• Nvidia's results on 17 November. Its third-quarter figures, after the US close, are the next big test. Nvidia guided in August for revenue of about $108 billion. Any sign that customers are delaying orders would matter more than the headline number.
• The new Congress. Watch for proposals on data centre planning, energy prices and AI rules once Democrats take control in January.
• Big Tech spending plans. If Microsoft, Alphabet, Amazon or Meta trim their spending forecasts, chipmakers will feel it straight away.
• Interest rates. Higher rates in the US and the UK make the AI build-out more expensive to fund. The Bank of England raised its rate to 4% this week.

What it means for UK investors

If you hold a global tracker fund or a US tech fund in an ISA or pension, its value will have dropped this week. Big one-day falls are unsettling, but selling after a sharp drop locks in the loss. Sharp falls in popular sectors have often been followed by partial rebounds, but there is no guarantee.

This article is news and analysis, not financial advice. If you are unsure what to do with your investments, speak to a regulated financial adviser.

Sources: CNBC, CNBC live market updates, Yahoo Finance, Benzinga, Fox Business, Investing.com, Yahoo Finance UK.