Up 1,569 points, then down 1,833 in two days: how did the data centre battle drag down AI stocks and Wall Street?

Executive summary

Two sessions: the second's losses exceeded the first's gains. The Dow Jones Industrial Average rose 1,569.40 points, or 3.03%, on Wednesday 4 November, its best session since 9 April 2025, after Democrats secured control of both houses of Congress in the Midterm Elections on 3 November, the US legislative elections held halfway through a presidential term. It then fell 1,833.06 points, or 3.44%, on Thursday 5 November, closing at 51,523.06 points, below its election-day close.

Wednesday's rally did not lift everyone. While the index rose, shares in companies supplying data centres fell: Vistra by 13.83%, Vertiv by 12.89%, and Micron by 7.00%. In the same session, Microsoft rose 6.68% and Amazon 6.12%; both are among the largest buyers of these supplies. Selling thus hit suppliers' shares before spreading across the market.

The cause is political, tied to specific states and local jurisdictions. Democrat Gina Hinojosa won the Texas governorship. She supports a temporary moratorium on new data centre construction, meaning a halt for a specified period. The state accounts for 41% of new US data centre capacity expected to come online in 2028, according to SemiAnalysis. Democrats also won governorships in the next three states ranked by this capacity, while voters approved data centre restrictions in at least 29 local jurisdictions.

On Thursday, selling spread from suppliers across the market. The Nasdaq Composite fell 5.52% and entered Price Correction territory, meaning it was more than 10% below its highest close. It is now 11.90% below its 6 October peak. The PHLX Semiconductor Index, SOX, comprising the largest 30 US-listed chip companies, fell 12.25% in its second-worst session since 1994. The volatility index (VIX) jumped 69.66% to 28.18 points, its third-largest daily surge since its records began in 1990. The index measures expected market volatility using options prices. Options are contracts giving holders the right to buy or sell an asset at a specified price within a set period. It is known as the market's fear gauge.

A single picture emerged after both sessions. From Tuesday's close to Thursday's close, SanDisk fell 28.41%, Vertiv 25.10%, and Micron 23.24%. Amazon, Apple and Microsoft, however, ended the two sessions higher.

What our records show. Since 1985, the EL7 price database records ten instances when the Dow Jones Industrial Average rose 3% or more, then fell 3% or more the next session. All occurred during crises: 1987, 2008, 2011 and 2020. In the nine instances covered by volatility index records, that index was never below 31.99 points on the day of the rally. This time it stood at 16.61 points. This is the first such sharp swing following a calm market. The Dow's performance after those ten instances varied and provides no basis for a forecast. This is an analytical assessment, not an investment recommendation.