Nvidia, Qualcomm Drop 8% as Nasdaq Posts Worst Day Since April

The Nasdaq fell toward its worst day in 19 months on Thursday, dragged down by an AI selloff that saw Nvidia and Qualcomm each drop about 8% amid fears that the artificial intelligence buildout is poised to slow. Neoclouds like CoreWeave tumbled for a second straight day, and the damage spread across the entire chip supply chain: Advanced Micro Devices, Micron and Applied Materials all suffered double-digit percentage losses.

The trigger was political as much as financial. In Tuesday's midterm election, the states with the most ambitious AI data center plans all turned blue, according to CNBC's account of the results. Democrats won key contests for governor and the Senate in Texas and Ohio, and took the gubernatorial race in Georgia, where Democratic Sen. Jon Ossoff also cruised to reelection. Elon Musk, who contributed hundreds of millions of dollars to try and get Republicans elected in Texas and elsewhere, saw shares of his public companies, SpaceX and Tesla, fall 7% and 10%, respectively.

Why did the election hit AI stocks?

Local ballots compounded the national result. There were 41 local ballot measures in 10 states up for a vote on Tuesday that would place restrictions on the construction of data centers in different ways, according to Ballotpedia. Voters sided against data centers in every measure except one in Harwood, North Dakota, according to an analysis by Ballotpedia and additional results gathered by CNBC on Wednesday.

Meta President Dina Powell McCormick said the political math has shifted. Speaking Wednesday night at the Wall Street Journal Tech conference, she told the audience that building data centers is "going to be harder" following the elections. She added that one of the victorious governors had said that, "As soon as we get past the inauguration, let's meet because we don't want to lose this investment in our town. We don't want these jobs to go elsewhere," according to the Journal.

The stakes are enormous. Meta, like its hyperscaler peers — Alphabet, Amazon and Microsoft — has laid out an ambitious path for infrastructure development, with spending plans that extend well past $100 billion a year. The strain is already visible in the cash flow statements: Meta went free cash flow negative in the latest quarter, joining Alphabet and Amazon, which turned negative in the prior period.

How bad is the debt picture?

The environment has gone from bad to worse for companies intimately tied to AI infrastructure. The combination of rising interest rates, ballooning capital needs and the Democratic sweep in Congress has led to increased fears that wide swaths of the market are going to be weighed down by too much debt and too little revenue.

Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners, framed the disconnect between technology and infrastructure in an interview with CNBC's "Squawk on the Street." He said: "The technology is still going to continue on in terms of its development, but if there is a slowdown in the actual development and the buildings and the infrastructure and so forth, that's what stocks are going to trade off."

Qualcomm added fuel to the selloff by issuing a disappointing earnings forecast for the current quarter. The company represents a broader dilemma for chipmakers: booming data center demand colliding with a global memory shortage that is jacking up prices and making key supplies harder to get, leading to surging prices for consumer devices.

What do the underlying numbers show?

The paradox of this selloff is that the revenue data remains strong. Qualcomm on Wednesday became the latest chipmaker to report booming growth in its data center business, though it is still a relatively small unit for the company. Qualcomm posted $650 million in data center revenue during the quarter, mostly from customizing and connectivity work, CEO Cristiano Amon said.

Amon was blunt about the constraint in an interview with CNBC: "We don't have a demand issue; it's a supply issue. If I had more supply, I would probably be doing better."

The same pattern holds across the sector:

• Intel last week reported a 78% jump in data center revenue, but the stock got crushed due to a weaker-than-expected forecast stemming from the memory shortage.
• AMD said this week that sales in its data center business more than doubled in the latest period.
• Qualcomm reported $650 million in quarterly data center revenue, its strongest signal yet that the unit is scaling from a small base.

Yet investors are looking past these numbers and questioning the sustainability of the growth — and, more fundamentally, whether buyers of the technology will be able to put it all to use. That question of end-demand absorption, not this quarter's revenue, is what moved markets on Thursday.

Richard Clode, a portfolio manager at Janus Henderson, told "Squawk on the Street" that uncertainty will linger: "There's going to be a knee-jerk reaction, and that could lead to some delays, and that's going to be some concerns. We're not going to solve for that in terms of knowing the answers to that anytime soon, unfortunately."

What comes next?

The immediate pressure points are legible. Hyperscalers carrying free-cash-flow-negative budgets must now negotiate data center approvals with newly elected Democratic governors who campaigned, in at least one case, on keeping the investment without necessarily accelerating it. Chipmakers must navigate a memory shortage that converts record data center demand into margin-eroding supply constraints, as Intel's forecast-driven selloff demonstrated last week. And neoclouds like CoreWeave, which fell for a second consecutive session, sit at the intersection of both risks: capital-intensive buildouts funded in a higher-rate environment, with local politics now a gating factor on physical expansion. Whether Thursday marks the start of a repricing of AI infrastructure debt, or a single-session correction in a longer buildout, depends on whether the supply problems Amon described and the political friction McCormick flagged translate into measurable delays in 2026 capital plans.