S&P 500 drops 4.4% in AI chip selloff as economic reports come in encouraging

U.S. stocks fell sharply on Thursday, November 5, in an AI chip selloff led by companies tied to the buildout of AI data centers. The S&P 500 fell 4.4%, or 334.89 points, to 7,353.73, its worst day since April 2025, according to the Associated Press. The Dow Jones Industrial Average dropped 1,833.06 points, or 3.4%, to 51,523.06, and the Nasdaq composite fell 5.5% to 24,315.00.

Underneath the stock moves, the day also brought some encouraging reports on the U.S. economy, and several analysts described the selling as driven more by positioning than by a change in business fundamentals. For B2B leaders planning budgets and technology purchases, both sides of the day matter.

What moved markets

Chip stocks took the largest losses. The PHLX Semiconductor index fell about 12%, Yahoo Finance reported. Nvidia fell 9.3%, Advanced Micro Devices fell 17.3%, cloud GPU provider CoreWeave fell 9.8% and GE Vernova, which supplies power equipment used by data centers, fell 7.5%, the AP reported. The Nasdaq closed 11.9% below its all-time high set last month, which puts it in correction territory.

Investors were weighing what Tuesday's midterm results, in which Democrats won control of Congress, could mean for data-center construction and AI regulation, according to the AP and Yahoo Finance. The AP noted that AI stocks have also swung for months on worries that higher borrowing costs could slow new data-center projects. The drop more than erased Wednesday's gain, which was the market's best day in three months.

Why some analysts see positioning, not fundamentals

Nomura cross-asset strategist Charlie McElligott said the primary catalyst is not a sudden deterioration in fundamentals but hedge funds rushing to lock in profits before the end of the year, Yahoo Finance reported. Vanda Research's Viraj Patel described a broader "buyers' strike" among institutional investors alongside forced selling by systematic and leveraged strategies.

Yahoo Finance also noted that while the Nasdaq and the semiconductor index closed in correction territory, the Dow and the S&P 500 were not close to that threshold. The AP pointed out that over the long term, stock prices tend to follow corporate profits and interest rates far more than who controls Washington.

Encouraging signs for businesses

Fewer U.S. workers applied for unemployment benefits last week, and a separate report showed worker productivity improved by more during the summer than economists expected, the AP reported. The AP said that could help the economy grow without adding pressure to inflation.

Treasury yields also kept falling. The 10-year yield dropped to 4.84% from 4.90% late Wednesday, after sitting above 5.30% last month, according to the AP. Borrowing costs have been one of the main concerns hanging over data-center construction, so the direction of yields is worth watching for companies financing equipment, facilities and technology projects.

Some companies also posted strong results. AppLovin, a marketing platform, rose 31% after reporting third-quarter revenue of $2.18 billion and profit above analysts' expectations, issuing fourth-quarter revenue guidance of $2.37 billion to $2.40 billion and expanding its buyback program. Tapestry rose 7.1% after beating profit expectations and raising its full-year forecasts.

What B2B leaders can watch next

For companies that buy AI infrastructure, cloud capacity or power equipment, Thursday was a move in stock prices, not an announcement of canceled projects. The questions to watch are whether Congress takes up data-center rules, where Treasury yields settle, and what the largest AI buyers say about spending in their next earnings reports.