AI Stocks Slide After Midterms: What to Watch in the Economy

U.S. stocks fell sharply Thursday after the midterms, with AI-exposed companies hit hardest, as investors weighed policy shifts and data center restrictions. The S&P 500 dropped 4.36 percent, its worst day since April 2025, before rebounding Friday. The selloff followed Wednesday's rally on clear Democratic majorities, but Thursday brought concerns about ballot measures in ten states backing data center restrictions. Eight major AI firms, including Nvidia and Apple, represent over one-third of the S&P 500's market cap, amplifying market volatility. Key questions now are the economy's strength and whether selling is technical or fundamental. Low jobless claims offer optimism, while forced selling from leveraged ETFs may be temporary. Historically, the S&P 500 ends years positively 70 percent of the time despite drawdowns.