According to Reuters, investors dragged the Nasdaq Composite down 5.5% on Thursday (Nov. 5), marking its worst session since the "Liberation Day" selloff of April 2025. The drop was fueled by fears that a sweeping Democratic victory could stall the buildout of AI data centers. Investors holding tech BDRs or ETFs on the B3 felt the decline in reais, with a stronger U.S. dollar providing only partial cushioning.
Why Did the Nasdaq Fall 5.5%?
Reuters reports that the selloff stemmed from fears that a landslide victory by the Democratic Party in the midterm elections could stall the expansion of AI infrastructure and force a reckoning for smaller companies that were already struggling to raise capital amid high interest rates. The index closed at 24,315 points, a loss of 1,422 points in a single session.
What makes the timeline notable is the sequence of events. The elections took place on November 3, and Wall Street initially celebrated on Wednesday. The reversal hit less than 24 hours later, as shown in the chart of the week's closes (the full history is available on our Nasdaq index quote and history page).
On Friday, the index rose 1.09% to close at 24,579.42. That clawed back 264 points compared to the more than 1,400 lost the day before—recovering roughly 19% of the damage, by our math. The week finished down 3.37%. That leaves the question: what do elections have to do with computer chips?
What Does a Democratic Victory Have to Do with Data Centers?
It all comes down to energy. Data centers consume massive amounts of electricity and water, and the issue became a prominent campaign topic. Coverage from Terra and Reuters highlights concerns over tighter regulatory scrutiny and delays in permitting AI data centers due to their strain on local power and water grids. Geography compounded the issue: according to CNBC, the states with the most ambitious AI data center plans all turned blue, including Texas, Ohio, and Georgia.
The election served as the trigger, but the tinder was already there. CNBC points out that a combination of rising interest rates, growing capital needs, and the Democratic congressional victory reinforced fears that parts of the market were overleveraged and generating insufficient revenue. Yahoo Finance notes that hedge funds had been trimming AI positions for over a month, and that Lam Research and Applied Materials had already shed about a third of their value in the preceding month. It is the same dynamic we explained in why tech stocks are falling, now amplified by a political catalyst.
The heaviest blows landed on semiconductor stocks: according to Reuters, Nvidia dropped 9% and AMD tumbled 17%. Now, that headline figure of $2.5 trillion warrants a closer look.
Was It Really $2.5 Trillion? The Damage by Index
The figure is real, but it applies to a different index. According to Reuters, the Nasdaq 100—comprising the largest companies in the broader index—slumped 6.4%, erasing $2.5 trillion in market value. The broader Composite fell 5.5%. Yahoo Finance cites slightly smaller numbers, reporting a 6.3% drop for the Nasdaq 100 that wiped out $2.3 trillion, while the S&P 500 lost $2.8 trillion. While the sources diverge by hundreds of billions, the scale of the downturn feels the same to investors.
| Index (Nov. 5) | Change | Close | Note |
|---|---|---|---|
| Nasdaq 100 | −6.4% | — | $2.5 trillion, according to Reuters |
| Nasdaq Composite | −5.5% | 24,315 | Entered correction territory |
| S&P 500 | −4.4% | 7,353.73 | All 11 sectors finished in the red |
| Dow Jones | −3.4% | 51,523.06 | Gave up all of Wednesday's gains |
| Philadelphia Semiconductor Index | more than −12% | — | Epicenter of the selloff |
| Ibovespa | −0.82% | 166,191.45 | Same day the Selic rate was held steady |
A "correction" has a precise definition: a drop of more than 10% from a record high. According to CNN Brasil, the Nasdaq Composite sits nearly 12% below its record close of October 6. By our estimate, that peak was near 27,600 points. The most important takeaway for investors moving forward is that the Ibovespa held up much better.
What Changes for Investors Based in Brazil?
Investors holding U.S. tech exposure via the B3 felt the drop in reais, though with a slight cushion. On the same day, the spot dollar rose 0.67% to close at R$ 5.4876 as global investors sought a safe haven.
An ETF tracking the Nasdaq 100 in reais lost roughly 5.8% on the day by our estimate, reflecting a 6.4% drop in the index offset by a 0.67% gain in the dollar (0.936 × 1.0067). An Nvidia BDR likely fell by about 8.4%. These figures are approximate, as trading hours and BDR liquidity can shift exact returns. The long-term thesis is not broken by a single day's trading. What has changed is the risk profile: the market is now pricing in a political hurdle that previously went ignored.
The Ibovespa remained insulated from the epicenter because Brazil's benchmark index has relatively little tech exposure. The domestic market's dip was driven more by global sentiment than direct AI exposure, compounded by a local decision: Brazil's central bank held the Selic rate steady at 13.75% a year, pausing a sequence of five rate cuts. In Asia, where chip exporters carry heavy weight, the damage was more severe—as we covered when the Nikkei entered a bear market and dragged down regional exchanges.
Physical real estate funds (FIIs) have no direct ties to American data centers. The spillover happens through a different channel: when foreign investors trim allocations in emerging markets, capital flows out of international indexes and can impact even large funds, as we saw when HGLG11 absorbed the rebalancing of a global index. With the Selic rate parked at 13.75%, fixed income continues to offer attractive yields for investors who prefer to wait out the turbulence.
Has the AI Bubble Burst? What to Watch Next
It is too early to tell. This was a sharp pullback, but not an isolated one: CNN Brasil notes it was the fifth drop of more than 500 points for the Nasdaq Composite since mid-October. Ted Parkhill of Incline Investment Management summarized the shift in Reuters' coverage, noting that the market is beginning to price in the actual cost of AI rather than just its potential. Calendar considerations also weigh heavily. Friday's strong employment report raised expectations for U.S. rate hikes, which spells trouble for companies reliant on credit to fund data center construction.
- Mega-cap tech saw immediate dip-buying: on Friday, Nvidia gained nearly 3% to return to positive territory for the year, according to CNBC.
- Restrictions on data centers depend on legislation and state-level permitting. That process takes months, meaning Thursday's reaction priced in a scenario that does not yet exist.
- House Democrats have already discussed forming a special committee to oversee AI, complete with subpoena power to demand corporate documents. Each development could fuel fresh headlines and renewed selling waves.
- Highly indebted AI cloud providers like CoreWeave and Nebius rely heavily on expensive credit. If U.S. interest rates rise further, they will be among the first to feel the pain.
- Friday's rebound was modest and concentrated in chip stocks. The recovery remains narrow and has not broadened across the wider market.
