Nasdaq drops 5% as investors dump AI stocks on Iran and policy uncertainty

Nasdaq closed down 5 percent on Thursday, entering correction territory as investors sold off AI-related stocks amid uncertainty over Iran, oil prices, and the implications of Washington's power shift. The broader S&P 500 fell 3 percent, while the Dow Jones Industrial Average declined more modestly. The selloff was driven by a sector rotation away from AI-linked shares, with analysts citing criticism over the financing and expansion of AI data centers, alongside sharp gains for AI stocks during 2026. Uncertainty over economic policy following Tuesday's midterm elections, which gave Democrats a new congressional majority, also weighed on markets. Oil prices rose toward $100 per barrel amid reports of tankers in the Strait of Hormuz. The decline followed a strong rally on Wednesday, when the Dow rose 3 percent. Major decliners included Tesla and SpaceX, both down 9-10 percent, while Nvidia fell 4.1 percent and Qualcomm dropped 9.3 percent after a weak earnings report.