Wall Street is digesting the prospect of a slower AI buildout in the wake of the midterm election results

Sandisk shares are among the S&P 500's biggest Thursday decliners.

A dramatic selloff in chip stocks is helping drive the Nasdaq Composite index toward its worst day since April 2025 as investors digest the potential for the midterm election results to curtail artificial-intelligence momentum.

Shares of Sandisk (SNDK) were down 20% on Thursday, while shares of Advanced Micro Devices (AMD), Micron Technology (MU), Western Digital Corporation (WDC) and Seagate Technology Holdings (STX) were off more than 15%. Shares of Intel (INTC) were down 8%, and Nvidia's stock (NVDA) was down 9%.

The PHLX Semiconductor Index SOX was off 11.3% and on pace for its worst decline since March, 16, 2020, according to Dow Jones Market Data.

Even Yorkville Ives analyst Daniel Ives, know for his bullish views on the tech sector, acknowledged that he and investors have gotten "more selective" on the AI-exposed stocks that could outperform heading into next year.

Ives said that the companies that will benefit most in the new political environment will be those that can show "tangible" AI use cases and returns on investment, rather than companies in the chip and memory space tied to the buildout of AI infrastructure.

The AI buildout will be "slower and a longer process than it looked like 48 hours ago," he said. Permitting and regulatory challenges could slow the data-center buildout in key states like Texas.

Investors are concerned that the data-center expansion will slow in the aftermath of the "tsunami" midterm results, Maxim Group analyst Tom Forte told MarketWatch.

"A number of candidates from both parties ran on this message for voters concerned about inflation in electricity prices," he said. "Now we are monitoring to see if the election results actually slow down the expansion," he added.

Rosenblatt Securities analyst Kevin Cassidy said it's unclear how politicians will ultimately act, but for now, "investors don't like uncertainty."

See also: Colleges raced to build massive computer-science departments. Now the boom is turning to bust.

-Hannah Pedone