Stocks Slide as AI Trade Unwinds and Crypto Liquidations Add to Post-Election Volatility

What happened in the market

Stocks slumped as the AI boomlet buckled and investors digested Tuesday's midterm outcome. The Nasdaq fell 5.5%, the S&P 500 slid 4.3%, and the DJIA declined 3.4% - the roughest session for U.S. equities since the Liberation Day tariff measures announced by President Trump in April 2025.

Tech bore the brunt. The Nasdaq 100, more concentrated in mega-cap tech than the broader Nasdaq, dropped 6.4%, and the Philadelphia Semiconductor Index sank 12% - both their worst single-day moves since the March 2020 Covid shock. Disappointing chipmaker results added to the downdraft.

Gold did its safe haven job, up 0.6% to 4,094 dollars per ounce after backing off earlier intraday highs.

Why AI and the election mattered

Traders weighed the implications of midterms that put Democrats in charge of both the House and the Senate. Desks fretted that heightened political resistance might impede building out the data centers that underpin the AI surge - an area that has become increasingly tied to bitcoin miners' fortunes.

FalconX's global co-head of markets, Joshua Lim, said, "We're seeing some fresh selling come back to the market as the implications of slower data center buildout come into focus." "Yesterday's post-election relief rally was driven by a lot of short-covering into a well-telegraphed result."

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Carlos Guzman, GSR's research vice president at the crypto trading firm, noted that investors had already been questioning the payoff from massive AI infrastructure spending, and that the election outcome layered on another concern. "The midterms appear to have triggered this sell-off, with investors worried that greater opposition to data-center expansion could slow the AI buildout," he said. "This has added to concerns about the returns on AI spending that were already building."

Crypto wobble, leverage flush, and why it looks smaller than stocks

Digital assets fell, but not as hard as many AI-linked equities. Depending on the snapshot, bitcoin was lower by about 5.2% over the past day and just under 76,000 dollars, and roughly 5.5% in other readings, back near levels before Wednesday's rally. Ether was 2,227.60 dollars and down 7.5%, while XRP and solana each slipped 5.5%.

The retreat lined up with a burst of forced unwinds in derivatives, where traders had leaned into leveraged long bets. CoinGlass reported more than 1 billion dollars of crypto derivatives positions liquidated over the past 24 hours, mostly from bullish wagers - the biggest purge going back to at least Oct. 28-29, when bitcoin slid from nearly 82,000 to 76,000 dollars.

Wintermute's Jasper De Maere urged caution on reading too much into a single day. Crypto has held up relatively well versus the AI-heavy stock slump, he said, and broader adoption continues to support the medium-term view. "Let's see where we land in the short term here; medium term still glass half full," he said, adding that with correlations high, investors should "keep an eye out for bargains surfacing over time."

What this means for your portfolio

One thread ties it together: a cooler AI trade meeting post-midterm uncertainty and shaky chip earnings, with leverage amplifying crypto swings. That mix sent major indexes sharply lower, semis hardest of all, even as gold ticked up and crypto fell by a bit less than AI-sensitive stocks.

In plain English: policy signals, sector earnings, and leverage can reshape risk fast across stocks and digital assets. If your exposure leans into AI infrastructure, chipmakers, or leveraged crypto, the day's moves show how quickly those risks can cluster.

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