NEW YORK — Wall Street's most closely watched gauge of market anxiety logged its biggest jump in more than 18 months on Thursday, 5 November 2026, as a brutal selloff in chip and data-center stocks dragged the Nasdaq Composite more than 10% below its record closing high and into correction territory. The Cboe Volatility Index, known as the VIX, surged 11.5 points to an eight-month high of 28.09, its largest one-day rise since the days immediately after US President Donald Trump unveiled sweeping import tariffs on "Liberation Day" in April 2025 — a violent reversal of the post-election rally that had lifted markets just a day earlier.
Illustration: The New York Stock Exchange on Wall Street, where the Nasdaq slid into correction territory as the VIX spiked to an eight-month high.
What Happened
The selloff struck fast and hit the market's most crowded trade hardest. The Nasdaq Composite fell 4% on Thursday, according to Reuters, after falling nearly 4% to 24,712.60 in morning trading — more than 10% below its record close — putting the index on course to confirm a correction, generally defined as a decline of at least 10% from a recent high, if it closed there. The Nasdaq 100, a narrower index of the largest non-financial companies, tumbled about 6%, while the S&P 500 fell about 3.7% and the Dow Jones Industrial Average lost about 2.5% by late morning in New York, according to Bloomberg reporting. The rout was not confined to the United States: the Stoxx Europe 600 slipped 0.7% and the MSCI World Index dropped 2.7%.
Chipmakers and the companies building the infrastructure for artificial intelligence led the declines. SanDisk plunged about 20%, Advanced Micro Devices and Micron fell about 15% each, Tesla dropped about 10%, Nvidia slid about 8% and Meta lost about 7%, according to market quotes carried by Reuters. The Philadelphia Semiconductor Index, which tracks the largest US chip companies, fell about 7% in early trading and was down more than 11% at its session low. Qualcomm, whose disappointing outlook helped set the tone, fell about 9% after reporting that its fiscal fourth-quarter handset revenue had dropped 26% from a year earlier to about $5.14 billion, below the $5.25 billion analysts had expected. Bitcoin also fell, dropping below $77,000 as risk appetite drained from markets.
The VIX, an options-based indicator that reflects demand for protection against further drops in the stock market, captured the scale of the fear. It jumped 11.5 points to 28.09, an eight-month high, and was last at 27.65. "It really did look as though things were going to relax a little bit and then, you know, the steamroller showed up today," Jim Carroll, a senior wealth adviser and portfolio manager at Ballast Rock Private Wealth in Charleston, South Carolina, told Reuters. Steve Sosnick, chief strategist at Interactive Brokers, put it more bluntly: "Yesterday there was the perception that no one needed protection and now it's 'Oh my god, we need it'."
Analysts said much of the selling reflected an unwind of the previous session's sharp rally and of the crowded AI trade that has driven markets for months, as well as investors cutting risk ahead of expected volatility-driven selling by funds and trading strategies. Leveraged and inverse exchange-traded funds, along with some systematic strategies, typically rebalance their exposure near the market close, which can amplify late-day moves in either direction. "You have people saying ... look at what's going to happen at the end of the day, we need to get out before that," Carroll said.
Background
Thursday's selloff was the mirror image of Wednesday's euphoria. A day earlier, markets had rallied sharply after Democrats swept the US midterm elections and took control of Congress: the Nasdaq gained 1.44%, the Dow jumped 3% to close at 53,356.12, and the S&P 500 rose 1.6%, according to Yahoo Finance. Investors initially brushed aside the idea that a change of guard in Washington might threaten the AI boom. By Thursday morning, that confidence had evaporated, and the market's mood flipped from celebration to fear in a single session.
Illustration: Traders watch red numbers pile up on a trading floor as the selloff in chip and data-center stocks spread across Wall Street.
At the heart of the reversal is a growing question about the economics of the AI boom itself. The world's biggest technology companies have borrowed heavily to fund data centers and chips, and investors are increasingly asking how quickly that spending turns into profit. Reuters reported that the selloff was tied to worries about heavy AI spending and tighter scrutiny of data-center expansion, with the new Democratic Congress expected by some investors to slow the pace of AI infrastructure development. "This is what happens when you have a big rally partly predicated on the idea that volatility would be decreasing ... it made no sense yesterday," Sosnick said.
The political backdrop added to the nervousness. Democrats' resounding midterm sweep gives them a large platform to scrutinize President Trump's trade policies, though trade and legal experts told Reuters that they remain largely unable to override his veto on any vote to overturn his tariffs. The same uncertainty hangs over the AI buildout: investors fretted that a Democratic Congress might impose new scrutiny or regulation on data-center construction, even as the scale of the spending — and the debt funding it — was already drawing questions from analysts.
The market turmoil came on a day of otherwise steady economic news. The US Labor Department reported on Thursday that first-time applications for unemployment benefits fell by 6,000 to 189,000 in the week ended 31 October, below the 196,000 economists in a Reuters poll had expected and matching the lowest reading since 1969. The number of people still collecting benefits rose by 23,000 to 1,718,000. A separate report from outplacement firm Challenger, Gray & Christmas showed US employers announced plans to cut 43,994 jobs in October — the fewest for any October since 2023 — while planned hiring reached 444,692, the most for any October since 2009. The official October jobs report is due on Friday, 6 November, with economists expecting a gain of about 65,000 jobs and the unemployment rate to hold at 4.2%.
Central banks were also in the picture. The Bank of England raised its policy rate to 4% on Thursday, its first increase in more than three years, while the Reserve Bank of Australia delivered its fifth increase of 2026 this week, taking its cash rate to 4.85%, the highest in 18 years. The Federal Reserve left its benchmark rate unchanged in October, at 3.75% to 4.00%, and markets were pricing an 80% chance of a further increase at its December meeting, according to Reuters.
Why It Matters
Thursday's plunge matters because it tests the single trade that has carried global markets for months. The AI investment theme — chips, data centers, power and the software built on top of them — has driven the Nasdaq to record after record, concentrated enormous weight in a handful of companies, and drawn in borrowed money at every level of the system. When the ten largest companies hold nearly 39% of the S&P 500, a chip story becomes a market story very quickly, and Thursday showed how fast that transmission works: a 10%-plus slide in a chip index became a 4% fall in the Nasdaq and a spike in the fear gauge within hours.
The VIX move itself is a warning signal with a history. The last time the index jumped by anything like this amount was in the days after the "Liberation Day" tariff announcement in April 2025, when markets were gripped by fears of a trade war. A jump of 11.5 points in a single session does not happen in a calm market; it happens when investors who had stopped buying protection suddenly decide they need it all at once. Whether Thursday proves to be a one-day air pocket or the start of something longer depends, analysts said, on whether the re-evaluation of AI spending is a lasting change of mind or just a bout of profit-taking. "If the re-evaluation of the AI investment theme is secular and not just a trading type of rebalance, that's problematic," Sosnick told Reuters.
The timing adds to the stakes. The October jobs report lands on Friday morning, and the Federal Reserve's December meeting is now the market's next big test: a strong report would reinforce expectations of another rate increase, while a weak one could ease them. With the Nasdaq in correction territory, the S&P 500 about 4.4% below its own record, and the VIX at its highest in eight months, investors head into that report with far less cushion than they had a week ago.
What Happens Next
All eyes now turn to Friday's October jobs report, due at 8:30 a.m. Eastern Time. Economists surveyed by Reuters and FactSet expect employers to have added about 65,000 jobs in October, up from 29,000 in September, with the unemployment rate holding at 4.2% and average hourly earnings rising about 0.3% on the month. A number well above that forecast would likely strengthen the case for a December rate increase by the Federal Reserve; a much weaker one could revive talk that the labor market is cooling faster than expected.
Illustration: A semiconductor chip and data-center servers — the heart of the AI trade that investors began to rethink on Thursday.
Traders will also watch whether the chip selloff extends into a second week. The Philadelphia Semiconductor Index had been up sharply for the year heading into the week, and the gauge of chip giants was on course for its worst week since the April 2025 tariff selloff, according to Bloomberg. If buyers step back in, Thursday may be remembered as a sharp but healthy correction in an overheated trade. If the selling continues, the questions about AI spending, data-center debt and the pace of returns will only get louder — and the VIX, which spent Wednesday near its lows, will tell the story first.
Beyond the immediate data, the political calendar will keep pressure on the trade. The new Democratic Congress takes its seats with oversight of trade, technology and AI policy high on its agenda, and the trade truce with China expires in January, with talks set to resume later this month. For now, the market's message from Thursday is simple: after months in which the AI trade only went up, investors have rediscovered the price of protection — and they paid up for it in a hurry.
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FAQ
What is the VIX?
The Cboe Volatility Index, or VIX, is an options-based indicator that reflects how much protection investors are buying against drops in the stock market. It is often called Wall Street's "fear gauge" because it rises sharply when investors become worried and falls when markets are calm.
Why did the VIX jump so much on 5 November 2026?
The VIX jumped 11.5 points to 28.09, its largest one-day rise since April 2025, as a selloff in chip and data-center stocks dragged the Nasdaq into correction territory. Investors who had stopped buying protection after Wednesday's post-election rally suddenly rushed to buy it, and the unwinding of the crowded AI trade amplified the move.
What is a stock market correction?
A correction is generally defined as a decline of at least 10% from a recent high. On Thursday the Nasdaq Composite fell more than 10% below its record closing high, putting it in correction territory if it closed there.
Why are chip stocks falling?
Investors are questioning how quickly the huge spending on AI data centers and chips will turn into profit, with big technology companies borrowing heavily to fund the buildout. Disappointing results from Qualcomm and fears that a new Democratic Congress could slow data-center expansion added to the pressure.
What should investors watch next?
The US October jobs report on Friday, 6 November, is the next big test, followed by the Federal Reserve's December meeting, where markets are pricing a high chance of another rate increase. Whether chip stocks stabilize or keep falling will show whether Thursday was a one-day correction or a lasting rethink of the AI trade.
Sources
- Reuters — "Wall Street fear gauge jumps most since 'Liberation Day' as AI trade stumbles," 5 November 2026. https://www.reuters.com/business/wall-street-fear-gauge-jumps-most-since-liberation-day-ai-trade-stumbles-2026-11-05/
- Reuters — "BoE joins the rate hike club, Australia may be done already," 5 November 2026. https://947thebeast.com/2026/11/05/boe-joins-the-rate-hike-club-australia-may-be-done-already/
- The Retest — "Nasdaq on track for a correction as AI-spending doubts hit tech stocks," 5 November 2026. https://theretest.com/brief/2026-11-05-breaking-nasdaq-correction
- Eurasia Business News — "Stock Market Today: Nasdaq Sinks 5% as AI Selloff Hits Chip and Data-Center Stocks," 5 November 2026. https://eurasiabusinessnews.com/2026/11/05/stock-market-today-nasdaq-sinks-5-as-ai-selloff-hits-chip-and-data-center-stocks/
- Bloomberg, via Binance Square — "Nasdaq 100 Tumbles 6% as Chipmaker Rout Deepens on AI Regulation Fears," 5 November 2026. https://www.binance.com/en-AE/square/post/11-05-2026-nasdaq-100-tumbles-6-as-chipmaker-rout-deepens-on-ai-regulation-fears-385040026281856
- Morningstar — "October Jobs Report Seen Showing Resilient Labor Market," 5 November 2026. https://www.morningstar.com/economy/october-jobs-report-seen-showing-resilient-labor-market
- SourceFirst News — "US jobless claims fall to 189,000 in week ended Oct. 31," 5 November 2026. https://sourcefirstnews.com/us-jobless-claims-189000-week-ended-oct-31-2026
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