US stocks logged their biggest weekly loss since April 2025 on concerns over the artificial intelligence trade after Democrats swept the US midterm elections.
Even though the Nasdaq 100 Index climbed 1.4%, and the S&P 500 Index rose 0.3% Friday the gains weren't enough to claw back a brutal session a day earlier. The US benchmark ended the week 2.7% lower, the most since April 2025.
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It was a rollercoaster week full of superlatives. Stocks surged Wednesday following the midterms on what was seen as a relief rally following the midterms. Tech megacaps also jumped.
But the advance was short-lived. On Thursday, tech stocks plunged sending the Nasdaq 100 to notch its biggest one-day rout since the Covid pandemic. The anxiety around the AI trade sank in as many voters indicated opposition to data centers and expectations mounted for a potential regulatory shift that could crimp the growth of chipmakers and data center suppliers.
“This week threw the AI trade in a blender,” said Dave Mazza, chief executive officer at Roundhill Financial Inc. “Net net, the AI buildout just got politically harder, but not impossible, and the market is still sorting out if this is a parallel to 1998 or 2000.”
Photo Credit: Bloomberg
Retail traders, the stock market's most avid dip buyers since the pandemic, were among the investors buying on Friday after US equities had their worst day since 2025. But their typical enthusiasm was nowhere to be found.
“We had been telling people to hedge in the weeks leading up to this, and some of those clients are now removing the hedges as a way to get more exposure,” said Brian Nick, head of portfolio strategy at Newedge Wealth LLC. “For clients putting new money to work, we are continuing to emphasize quality.”
In the options market, while total option volumes surged to a record high on Thursday and put skews steepened as stock indexes plunged, the positioning signals that traders weren't necessarily piling on bearish bets.
The ratio of open interest in Invesco QQQ Trust Series 1 ETF puts to calls sank to the lowest level since March 23, 2020. That late-March period marked the low for the main fund tracking the Nasdaq 100 during the Covid pandemic.
Photo Credit: Bloomberg
Goldman Sachs Group Inc. traders said the violent selloff in US equities has pushed market panic to an extreme level that historically signals a strong rebound over the medium term. The bank's Vol Panic Index surged to 9.57 out of 10 on Thursday, crossing the 9.5 threshold that marks the panic zone.
Goldman's historical analysis suggests the medium-term outlook becomes more constructive when panic reaches such extremes. Following the 15 previous signals in which its Vol Panic Index exceeded 9.5, the S&P 500 gained an average 4.6% over the subsequent three months, with an 80% hit rate. Over six months, the average gain was 9%, with stocks rising in 73% of cases.
In single-stock movers, shares of Microsoft Corp. fell 1%, while Oracle Corp. rose 0.8% Friday on a Bloomberg News report that the software giant is winding down an arrangement to rent AI computing from Oracle Corp., part of a larger reassessment of billions of dollars in cloud partnerships.
SpaceX shares gained 8.6% Friday as CEO Elon Musk said SpaceX's fourth-quarter revenue will jump “something like” 70% from the third quarter and that the rocket, satellite and artificial intelligence company is on track for a $100 billion annualized rate revenue in December.
Meanwhile, traders betting against companies led by Musk were among the biggest winners since Tuesday's midterm elections. Shares of Tesla Inc. and SpaceX sank 14% and 13%, respectively, in just two days, erasing a combined $460 billion from their megacap market values as investors fretted over what a blue wave would mean for Republican ally Musk and his businesses.
Tesla and SpaceX short sellers earned $6.5 billion in mark-to-market profits over as the stocks sold off Wednesday and Thursday, according to Sam Pierson at S3 Partners.
Photo Credit: Bloomberg
In the IPO space, Anthropic PBC's initial public offering plans ran into a punishing post-election selloff, prompting a rethink among prospective investors of the company's expected valuation.
Prediction markets and perpetual futures are signaling that Anthropic's IPO might be postponed, which could amplify pessimism surrounding the AI trade.
Kalshi contracts as of Friday midday showed a 69% chance the company will officially announce an IPO by Jan. 1, down from 99% earlier this year, while Polymarket showed a 71% chance of an announcement by Dec. 31, down from a recent reading of around 96%.
On the economic front, US job growth surged in October and the unemployment rate edged lower, a sign of labor-market strength in an expanding economy. Nonfarm payrolls increased 165,000 last month, topping all forecasts, after an upward revision to the prior two months, according to Bureau of Labor Statistics data out Friday. The unemployment rate fell to 4.1%. Stronger than expected labor report bolstered the case for the Federal Reserve to raise interest rates next month.
Sectors in Focus
- Artificial intelligence infrastructure stocks rebounded after tech stocks wiped out $2.3 trillion in market value in Thursday's widespread rout.
- Memory stocks pared some gains after The Information reported that TSMC is mulling expanding into advanced memory chips. Sandisk and Micron dipped on the report but are still higher
- Beverage stocks traded lower after Monster Beverage Corp. reported a miss on third-quarter gross margin
- Watch sports betting stocks after DraftKings Inc. shares tumbled after its outlook missed the average analyst estimates
- Industrial giants that supply data centers, including Caterpillar, GE Vernova and Vertiv, may end up benefiting as new regulations on data centers drive demand for equipment that lets the sites generate their own electricity, according to UBS.
- Shares of athletic apparel companies fell after Under Armour reduced its year gross margin forecast, citing higher costs.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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