US$ $2.9 trillion wiped out in a single sessionS&P 500, November 5, 2026
The S&P 500 closed Thursday down 4.36% at 7,353.73 points—marking Wall Street's worst trading session since "Liberation Day" in April 2025, when abrupt tariff announcements shook the markets. The catalyst was political: a Democratic victory in the U.S. midterm elections sparked fears that artificial intelligence expansion could be reined in by law, sending the technology sector into a tailspin.
What Happened to the S&P 500 on Thursday?
The index dropped from 7,688.62 points—where it had finished Wednesday up 1.58%—to close the session down 334.89 points. The pullback leaves the S&P 500 6.2% below its all-time high of 7,844.52, reached on October 6, though the index still boasts a 10.6% gain for 2026. Updated figures are available on the S&P 500 today page.
The sell-off was widespread: the Nasdaq Composite plunged 5.52%, the Dow Jones fell 3.44% (1,833 points), and the S&P 500's technology sector tumbled 7.30%—its worst daily performance since March 16, 2020, at the height of the pandemic panic. The chip sector index dropped 12% on the day, with several companies breaking below their 200-day moving averages.
Nvidia, the poster child of the AI boom, was the index's biggest drag: it fell 9.3% and single-handedly evaporated over $440 billion in market value. After posting annual gains of 239%, 171%, and 39% over the previous three years, the chipmaker finished the day down 2.6% for 2026 overall. AMD sank 17%, and SanDisk dropped more than 22%. All 11 sectors of the S&P 500 closed in the red without exception, and the "Magnificent Seven"—the mega-cap tech giants that drove much of the AI-era market rally—lost over $1 trillion in combined market capitalization in a matter of hours.
The Bill That Terrified the Market: Data Center Moratorium
What turned profit-taking into panic was how the market interpreted a Democratic victory for AI infrastructure. In March, Senator Bernie Sanders, an independent who caucuses with the Democrats, introduced a bill alongside Representative Alexandria Ocasio-Cortez calling for an immediate pause on all new data center construction with peak loads above 20 megawatts—pending comprehensive federal AI regulation from Congress.
The election results gave that proposal renewed weight. Out of 45 local ballot initiatives aimed at restricting data centers across various states, 39 passed. Democrats also secured majorities in Congress and elected Gina Hinojosa, who pulled off an upset in the Texas gubernatorial race. According to Joe Maher, an economist at Capital Economics, the trigger was clear: "The concern that Democrats, both in Congress and at the state level, will seek to regulate the AI industry and restrict data center construction."
It is worth noting what has not happened yet: no law has been passed. The new Congress does not take office until January 2027. Thursday's drop reflected preemptive risk pricing rather than an enacted policy. For Jakub Rochlitz, an analyst at eToro, what brought the issue to the political forefront was the rising cost of electricity, which turned the rapid expansion of data centers into a campaign issue across U.S. states.
The Pre-Election Question: Returns on Billions in AI Spending
Regulation didn't create a brand-new worry—it amplified an existing one. Hundreds of billions of dollars have been poured into chips, servers, and data center capacity over the past two years, and analysts cited by Reuters have raised questions about whether those investments are sustainable and how high financing costs might impact the projects.
The logic of the AI trade was simple: endless chip demand, Nvidia profits, rising valuations. If data center construction is capped by law—or by the political cost of building them—the entire supply chain loses a significant share of projected demand. Multiples built on unconstrained growth suddenly require a reassessment. In October, during another bout of sector stress, the Nasdaq already dropped 5.49% after the Federal Reserve delayed interest rate cuts, and big tech stocks absorbed part of that adjustment back then.
Friday's 0.65% recovery suggests part of the drop was short-term panic. Even so, questions about the return on AI investments will not disappear after a single up day.
- The S&P 500 is still up 10.6% for the year and sits 10% above its level from 12 months ago—the drop is real, but it hasn't erased the rally
- No legislation has been passed; the new Congress only takes office in January 2027—giving the market time to reassess the regulatory threat
- 39 out of 45 local data center restriction initiatives passed—a political signal that extends beyond the Sanders-AOC proposals
- Questions surrounding the return on billions of dollars in AI investments existed before the elections and persist regardless of regulation
Investors holding S&P 500 ETFs saw their positions dip in a single session, though the index remains in positive territory for the year. The risk priced into the sell-off is forward-looking: if data center regulations take effect in 2027, the technology sector—the largest weight in the S&P 500—will directly impact the index's returns. For international investors, there is an added side effect: heightened risk aversion on Wall Street tends to sap global appetite for risk assets, including local equities and real estate funds.
Legislative proposals in the new Congress (Jan 2027)—if the Sanders-AOC bill comes up for a vote, the market will react well before the outcome. Watch for early statements on AI and data center regulation as soon as Congress is seated.
Nvidia's next earnings guidance—will reveal whether chip demand is holding steady or if clients have begun postponing orders out of regulatory fear. This serves as the most direct indicator of whether market anxiety is translating into real-world supply chain restrictions.
S&P 500 support levels—the index is 6.2% below its October high. The next notable technical floor sits around 7,200 points (our estimate, roughly 2.1% below Thursday's close). A break below that level would shift the debate from politics to fundamentals.
