U.S. stocks suffered their worst single-day plunge since the onset of the COVID-19 pandemic in 2020, with the Nasdaq-100 Index plunging more than 6% and wiping out a staggering $2.3 trillion in market value in one day. The storm swept across nearly all asset classes, leaving no room for escape—not even chip giants or defensive consumer stocks.
Goldman Sachs stock trader John Flood described the market's sudden shift as "another completely different day," bluntly stating, "The level of pain has reached high levels." Greg Taylor, Chief Investment Officer at PenderFund Capital, compared the current situation to the collapses of the dot-com bubble and the subprime mortgage crisis, saying, "The entire market is overly concentrated on the single theme of AI, and the unraveling of this theme has been too severe. This was bound to happen sooner or later."
From Wednesday’s rally to overnight’s plunge, the market’s logic underwent a fundamental shift within just 48 hours. With Democrats sweeping both chambers in the congressional midterm elections, markets had previously bet that a divided Washington would check Trump’s power and accelerate an end to the Iran war. Now, investors are rapidly repricing a core narrative: a Democratic-led legislature may slow down spending on artificial intelligence and data center development.
More concerning, there are no clear signs of stabilization yet in this selling wave. Institutional buying is absent across the board, while retail investors continue to net sell, and forced liquidations by systematic strategy funds may persist. Several market participants note that the bottom of this sell-off has likely not yet been reached.
Chip stocks suffer a total wipeout; tech sector bleeds heavily
The heaviest losses on Thursday were concentrated in the core of the artificial intelligence industry chain. The Philadelphia Semiconductor Index plunged 12% in a single day, marking its largest one-day drop since March 2020, and has now fallen more than 38% from its peak on June 22 of this year, officially entering a bear market.
NVIDIA, the world’s most valuable company by market cap, plunged over 9% in a single day, marking its largest drop since January 2025 and erasing all its gains for the year; storage stocks were severely hit, with SanDisk falling 22% and Western Digital dropping 17%; the NeoClouds sector led losses again, down approximately 20% since the election.
A basket of stocks with the highest short interest fell nearly 8%, while the unprofitable tech stock index including companies like Roku and Peloton dropped 7.7%, and highly leveraged, high-risk companies declined by approximately 4%. The Russell 2000 small-cap index plunged about 4.5%, entering a technical correction.
Volatility surges, signaling a deeper market correction
Market panic sentiment indicators are simultaneously reaching critical levels. The VIX index surged to its highest level since early April, rising 11.57 points in a single day to close at 28.18, marking its highest level since March this year; the VIX-implied volatility indicator posted its largest single-day point gain since the 2018 "Volmageddon" event.
Another notable technical signal is that the implied volatility of options tracking QQQ’s short-term fluctuations has, for the first time since late July, traded at a premium to the long-term volatility of the S&P 500 ETF (SPY)—a pattern often seen as a precursor to investor uncertainty about market direction. The spread between the spot VIX price and its three-month futures contract has widened to its widest level since April 2025, a historical pattern that has often preceded deeper declines.
Nomura strategist Charlie McElligott noted that the current market's negative gamma exposure is "enormous," meaning that price declines will continue to trigger trend-following mechanisms, and self-reinforcing selling pressure has not yet subsided.
Retail investors' active selling combined with institutional forced liquidations
The selling structure during this crash is characterized by retail investors actively selling combined with institutional forced deleveraging.
Vanda Research data shows that within 30 minutes after opening on Thursday, retail investors sold U.S. individual stocks at the largest volume since October, with a focus on technology stocks, and total selling volume is poised to match the peak outflow seen at the end of July.
Meanwhile, UBS noted that retail selling triggered risk control mechanisms in the futures market and forced liquidations of leveraged ETFs, further amplifying the downward momentum. Michael Monaghan, partner and portfolio manager at Founder ETFs, described the current market as a dual convergence of “buyer’s strike” and “forced liquidations by small hedge funds (pod shops)” — large pure long-only funds have ceased buying on dips, while hedge funds are liquidating positions across the board.
Goldman Sachs’ Prime Brokerage data corroborates this turmoil: yesterday’s rotation and hedge unwinding temporarily stabilized the market, while Thursday saw a broad “delta-one deleveraging” across the technology sector.
The Democratic blue wave reprices the AI narrative
In the immediate aftermath of the election results, market movements moved in the opposite direction of Thursday’s crash. On Wednesday, investors broadly bet that a divided Washington would check Trump’s power and bring the Iran conflict to a close, thereby easing inflation and interest rate pressures, leading to a noticeable rally in stock markets.
However, these bargain buyers were quickly overwhelmed by the reversal. Michael O'Rourke, Chief Market Strategist at JonesTrading Institutional Services, said the buying entered “too quickly.” He noted that although next year’s earnings projections make relevant tech stocks’ price-to-earnings ratios appear reasonable, a structural shift in the policy environment would fundamentally alter the outlook for data center development, rendering the existing earnings forecasts obsolete.
It was precisely this repricing of policy expectations that directly impacted the companies with the highest market valuations and the greatest reliance on AI capital expenditures.
The bottom has not yet been reached; divergence persists across the market.
When will the selling end? Market sentiment is clearly divided.
UBS analysts noted that retail investors showed modest buying pressure in the afternoon on Thursday, possibly nearing a阶段性 "capitulation point," but systematic risk-control funds are expected to continue selling on Friday at a scale exceeding $100 billion. The analysts assess that liquidity in U.S. futures markets during Monday’s Asian trading session will be the thinnest, potentially replicating the crash trajectories seen in August 2024 and April 2025—where selling pressure from Thursday to Friday triggers follow-on liquidations by hedge funds before Monday’s open, marking the true bottom.
Wedbush analyst Dan Ives warned that chip stocks still have an additional 10% to 12% downside potential; Tom Lee of Fundstrat holds the opposite view, calling the recent sell-off in AI-related stocks an "overreaction" and predicting a 20% rebound from current levels for tech stocks.
Eric Diton, President of Wealth Alliance, said he has gradually reduced his positions in AI stocks and increased his holdings in energy stocks to hedge against the risk of high oil prices, adding bluntly, "This sell-off has been extremely severe. The optimism we saw just a few days ago is no longer sustainable."