AI Trade Drives Sharp U.S. Selloff Before Partial Rebound

AI stocks lead a violent reversal in U.S. equities

The artificial-intelligence trade drove the biggest U.S. stock-market development of the past few days: a sharp selloff in chip and AI-infrastructure shares, followed by a partial rebound as investors reassessed election-related regulatory risks and the durability of AI spending.

The S&P 500 fell 4.4% in Thursday’s session, its worst day since April 2025, while the Dow Jones Industrial Average dropped 1,833 points, or 3.4%, and the Nasdaq Composite lost 5.5%. Nvidia fell 9.3%, while CoreWeave and GE Vernova declined 9.8% and 7.5%, respectively, according to The Associated Press.

Election risk and rates reshape the trade

The selloff followed the Democrats’ sweep of both chambers of Congress in the midterm elections, prompting concerns that a Democratic-led government could pursue tougher AI regulation. Investors were also weighing a stronger-than-expected October labor report, which raised uncertainty over the path of interest rates.

Nonfarm payrolls increased by 165,000 in October, unemployment edged down to 4.1%, and average hourly earnings rose 0.4% month over month and 3.1% from a year earlier, reported Yahoo Finance. The same report said futures pointed to a mildly positive opening as investors tested whether solid hiring and firm wages were consistent with a soft-landing outlook.

Rebound remains selective

Chip shares recovered on Friday, helping the Nasdaq rise 1.1% and the S&P 500 gain 0.3%, according to The Associated Press. A separate market report said the S&P 500 was up 1% and the Nasdaq 1.73% during Friday trading, with information technology leading sector gains; Atlassian fell 14.7% after its quarterly results, while Airbnb rose 9.4% after lifting its full-year revenue-growth forecast.TBS News

Nvidia remained central to market attention on Monday. Futures were higher overnight, but reports said Nvidia fell 4% in premarket trading amid renewed scrutiny of CEO Jensen Huang and the company’s leadership and governance, according to Yahoo Finance.

What to watch

Investors will be watching whether the AI complex can extend Friday’s recovery, how markets absorb the stronger labor data, and whether forthcoming inflation data and corporate earnings reinforce or challenge current expectations for interest rates and AI spending.