Amidst the stock market bloodbath of Thursday, November 5, Nvidia (NASDAQ: NVDA) suffered the worst drop in market capitalization in dollar terms, wiping slightly more than $447 billion during the session.
Indeed, NVDA shares opened at $195.92 following a moderate pre-market decline and then plummeted 9.26% to $181.60 during regular trading hours, meaning the blue-chip chipmaker’s valuation crashed from $4.83 trillion to $4.38 trillion.
Meanwhile, most of the U.S. stock market also saw a deep plunge, with the tech-heavy Nasdaq-100 index falling 6.36% during the Thursday session – its worst day since March 2020.
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Other benchmark indices such as the Dow Jones Industrial Average (DJIA) and the S&P 500 suffered comparable losses, with the former dropping 3.44% and the latter 4.36%.
Did the Midterms’ ‘blue wave’ trigger the stock market ‘red tsunami’?
The Thursday bloodbath appears generally linked to the tech sector anxieties over the Democratic sweep in the U.S. midterm elections, but also to a wider array of factors that have been accumulating, arguably, for years.
Looking at the political factors, the generally free reign that big tech has been enjoying under President Donald Trump might be coming to an end.
Between the shifting but generally apocalyptic – whether in terms of employment or an actual doomsday – narratives used to market artificial intelligence (AI), the mass layoffs, and the environmental impact of AI data centers, the technology sector has lost much of its luster in the public eye.
Under the circumstances, parts of the Democratic Party are pushing for infrastructure moratoriums and significant limitations in terms of the proliferation of super intelligence (SI) – President Donald Trump’s term for AI.
Still, the Thursday crash cannot be entirely pinned on the results of the November 3 election.
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How the AI ‘boom’ turned itself into an AI ‘bubble’
Since the start of the AI ‘boom’ with the original public release of ChatGPT in 2022, the technology sector has been spending vast amounts of money to further develop and facilitate the technology.
This program has led multiple traditionally cash-rich firms to find themselves lacking and seek additional funds through a variety of means, including payroll cuts, equity sales, and debt.
Considering the returns on these investments appear, by late 2026, minuscule relative to the expenditure and considering at least some of the money might have been wasted on account of hyperscalers’ inability to utilize all of the expensive hardware they purchased, many have taken to believing that AI has turned into an unstable bubble.
How Microsoft and a Dutch lender accelerated the Thursday selloff
Given the suspected instability, the Thursday bloodbath might have also come from and been made worse by two separate developments.
The first of these was The Information’s report that Microsoft (NASDAQ: MSFT) decreased its third-quarter (Q3) capital expenditures (CapEx) by $5 billion due to a ‘third party’ – allegedly the cloud-computing provider Iren (NASDAQ: IREN) – not having capacity ready for renting.
The second came in the form of a Bloomberg article claiming that a Dutch lender, ING, was selling about $500 million portfolio of data-center loans all at once.
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Data center firms and AI labs such as Anthropic and OpenAI have been at the center of the ‘bubble’ discussion since they have, generally, remained dependent on external investments and loans to continue operating despite the cycle already being four years old.
Their interconnectedness with other major firms due to what many allege amounts to circular financing and the recent credit market turmoil has only exacerbated the issue, helping explain how relatively minor firms might have triggered the $3 trillion Thursday wipe.
Featured image via Shutterstock
