U.S. stocks tumbled Thursday as investors pulled back from AI-related shares. The drop, analysts say, reflects worries that go well beyond one rough day on Wall Street.
The Dow Jones Industrial Average lost 1,833 points, or 3.44%. The Nasdaq Composite fell 5.52%, its steepest decline since April 2025, and ended more than 10% below its record closing high on Oct. 6—a level commonly used to define a market correction.
Investors are increasingly questioning the huge amounts of money being borrowed and spent on the AI boom, and whether the returns will justify it.
“Debt,” said Paul Mueller, an economist at the American Institute for Economic Research, when asked what was weighing most on investors’ minds.
Technology companies are taking on substantial debt to build data centers, Mueller said. Rising interest rates add to the cost, while political uncertainty has created questions about whether construction projects will face opposition.
Adam Patti, CEO of VistaShares, said investors are contending with political uncertainty, questions about returns and an increasingly crowded AI trade.
Midterm election results, including victories in several states central to data center development, have raised concerns about tighter regulation, slower permitting and opposition over electricity costs, Patti said.
Investors are also asking how long major cloud and technology companies can sustain their spending if it continues to weigh on free cash flow. Meanwhile, semiconductor stocks had become a particularly crowded trade, Patti said, making a sharp reversal more likely.
EToro market analyst Jakub Rochlitz said heavy borrowing and crowded positions may have intensified the decline. Election results, combined with some disappointing technology earnings, appeared to provide the trigger, he said, prompting leveraged investors to unwind their trades.
The amount of electricity required by AI data centers is another concern. It raises questions about the capacity of power grids, utility costs and how quickly new facilities can be built.
“Power is the real bottleneck in AI today, more than chips, and it deserves investor focus,” Patti said.
Much of the political risk remains at the state and local level, Patti said. Developers may move projects to places where power is more readily available and permitting is less difficult. “Capacity relocates. It does not disappear,” he said.
Still, Patti said Thursday’s sell-off does not necessarily signal weakening demand for AI. He described it as a reset in valuations and investor sentiment, rather than a change in the underlying fundamentals.
Mueller advised everyday investors not to draw broad conclusions from one volatile session. For most people, he said, diversification and holding investments over the long term remain sound approaches—and that means trying not to react to every market swing.
