The Zhitong Finance App learned that over the weekend, US President Trump blamed the Democratic Party for the loss of about 3 trillion US dollars in market value in a single day for US stocks and promised that the market would “return to an unprecedented scale and stronger stance,” but did not propose specific measures.
The real debate in the market surrounding this sharp decline is whether government regulations and data center construction restrictions at the AI development level will change long-term profit margins, or whether they will mainly delay the implementation of investments and amplify the short-term decline through crowded positions and leveraged liquidation. The Kobeissi Letter, a well-known investment research institute, favors the latter explanation. It believes that the election results had been fully priced before, and that the sudden worsening sell-off and profit settlement sentiment and excessive leverage had a negative catalytic effect on each other, causing the adjustment to evolve into a stomping on the market.
On November 5, the Nasdaq 100 index fell sharply by 6.36%, and the Philadelphia Semiconductor Index plummeted by 12.25%, all of which were the biggest one-day declines since March 2020. According to Bloomberg Bloomberg Intelligence statistics, the NASDAQ 100 constituent stocks evaporated about 2.3 trillion US dollars in a single day, setting the highest record level of the index's single-day market value loss; about 3 trillion US dollars corresponded to the cumulative evaporation market value of S&P 500 index constituent stocks in a single day, leveling the historical record during the COVID-19 pandemic. The Nasdaq Composite Index fell 5.52% on the same day, and its record was the biggest drop since April 2025.
The post-election market situation did not just decline. On November 4, Microsoft, Amazon, Alphabet, and Meta rose about 6.7%, 6.1%, 3.2%, and 1.4%, respectively. The initial capital transaction was — the fall in oil prices and fiscal deficit restrictions are expected to improve the macro environment after the Democratic Party wins a majority of seats in the Senate and House of Representatives, while the construction of new data centers may ease capital expenditure pressure on technology giants and increase the scarce value of existing computing power resources; the Philadelphia Semiconductor Index fell 3.13% during the same period, reflecting concerns that the supply chain was more directly affected by the slowdown in demand for equipment related to new data center infrastructure. By Thursday, the market further extended these concerns to AI revenue growth and return on investment, and the sell-off spread to big tech giants.
On Friday, data on adding 165,000 new jobs and falling unemployment to 4.1% provided a basis for economic resilience. The Nasdaq 100 and Philadelphia Semiconductor Index rebounded 1.35% and 4.21% respectively, and the VIX Panic Index also fell from 28.18 to 25.64. However, based on the closing points of the previous two Fridays, the two major indices still fell by about 4.91% and 12.15%, respectively, throughout the week. This path of dividing first, trampling on, and then repairing shows that funding is re-evaluating the price of AI growth, rather than simply completely withdrawing and abandoning technology assets based on an election result.
Trump blames Democratic victory for $3 trillion stock market crash
US President Donald Trump posted on Truth Social over the weekend that the midterm election results “took the US a big step backwards in the course of history.” Clearly, Trump blamed the midterm election results for the huge market capitalization losses experienced by the stock market last week.
The US president wrote on Truth Social: “The results of this recent election have taken America a big step back in history — even the stock market, which 'took off like a rocket' under 'Trump', lost $3 trillion in one day.”
The sell-off comes after the Democratic Party won an overwhelming election victory. Investors are concerned that the Democrat-controlled Congress and newly elected state officials may push for greater AI regulation and limit data center development. These concerns have further increased the pressure on AI investment transactions; previously, as infrastructure construction costs continued to rise, this transaction topic had shown signs of being pressured.
“But don't be afraid, we're coming back on a larger scale and stronger than ever before!” Trump added, but there was no further explanation.
On November 3, the Democratic Party won control of both houses of Congress, seized multiple Senate seats, congressional districts, governor positions, and control of the state legislature, and locked in the majority of seats in the House of Representatives and Senate earlier.
According to The Kobeissi Letter, the market initially rose, adding more than $1.2 trillion in market capitalization on the first trading day after the midterm elections, but this trend quickly reversed.
On November 5, the US stock market fell sharply, and trillions of dollars of market value evaporated. The Nasdaq Composite Benchmark Index, which mainly focuses on technology stocks, recorded the biggest one-day decline since “Liberation Day” in April 2025. Investors worry that the Democratic Party's victory means that the AI development process and AI infrastructure are facing stricter scrutiny. In particular, AI data center construction continues to slow down, and the expansion of the AI industry as a whole has shrunk.
Since the preliminary election results were announced on November 3, the price of the SPDR S&P 500 ETF (SPY.US), which closely tracks the S&P 500 index, fell by about 2.7%, while Invesco QQQ Trust (QQQ.US), which tracks the NASDAQ 100 index, fell sharply by nearly 5%. The SPDR Dow Jones Industrial Average ETF Trust (DIA.US), which closely tracks the Dow Jones Index, fell about 1%.
The Kobeissi Letter stated in a post on the X platform that the stock market crash could not be entirely due to the midterm election results, because the market had already largely digested this result before.
It said, “One of the most likely catalysts is that the market is increasingly concerned that AI technology may even be 'banned', or at least face extremely strict industry regulation. Over the past 24 hours, Democratic lawmakers have publicly called for restrictions on advanced AI development, including a direct 'ban on artificial superintelligence'.”
However, the market review and investment research agency pointed out that a total ban is unlikely, because it actually means that the US cedes its position in the global AI competition to China.
It said, “On the contrary, we believe that what is happening now is a sudden shift in market sentiment, which collides with excessive levels of leverage, which may trigger several large institutional investors to be forced to liquidate their positions. As a result, today's decline was driven more by technical factors and stamped-up factors due to deleveraging rather than fundamental factors. This is not to mitigate regulatory concerns; they do exist. But the current price trend seems neither orderly nor rational.”
The Kobeissi Letter added, “We are in the midst of the largest technological revolution in human history. Take a long-term view and stay calm.”
As of press release, on the Stocktwits platform, an investor platform where retail investors gather, retail investors' sentiment about SPY and QQQ is “bearish,” while their sentiment about DIA is “bullish.”
Regulatory concerns trigger a revaluation of profits, and leveraged liquidation amplifies the impact on market prices
Technology stocks are sensitive to policy changes, due to the fact that AI valuations are highly dependent on the continuous growth rate of AI computing power deployment processes, customer usage, and profit releases over the next few years.
Judging from the industrial mechanism, stricter requirements for data center approval, grid connection, or power cost sharing will extend the project construction cycle: chip and equipment orders may be delayed, revenue confirmation from computing power operators will be delayed, but interest will continue to accumulate during the construction period. Even if demand for terminal AI does not disappear and cash flow is moving backwards, it will depress its present value; financing pressure is particularly prominent for new cloud vendors that rely on debt to expand.
Melissa Brown, head of research at SimCorp, pointed out that it may not be realistic to completely block the development of AI infrastructure, but the serious slowdown in the AI data center construction process will undoubtedly touch US economic growth expectations based on the rapid expansion of computing power demand.
There are also hierarchical differences in policy risk. The proposition of “banning artificial superintelligence” and suspending advanced AI development promoted by some members of parliament involves specific technology and regulatory frameworks, and cannot directly be equated to the fact that all AI businesses will be banned.
According to official records, the relevant version of the H.R. 10538 bill is being proposed and transmitted to the Commission. The market is currently re-evaluating the probability of introducing restrictive policies, as well as the uncertainty of project costs, construction periods, and returns. For companies that already have power supply capacity, customer base, and mature business models, these changes may also reinforce resource barriers, so they fall under the same AI theme, and the direction of change in asset value is not necessarily the same.
Fundamental expectations determine the starting point of the sell-off, while the trading structure may determine the speed and magnitude of the decline. The J.P. Morgan derivatives team estimates that 90 minutes after opening on Thursday, S&P 500 futures had net sales of about US$11 billion; leveraged ETFs sold more than US$60 billion at the end of the session, about 90% related to technology-related products. Trend-tracking CTAs reduce positions after the price falls below the signal level. Volatility targeting strategies reduce exposure as risk rises, and leveraged ETFs adjust daily leverage. These mechanisms made the decline itself further generate sales, and also provided a transactional basis for The Kobeissi Letter's judgment that “sudden changes in mood collided with excessive leverage.”
Looking at it from this perspective, Trump's statement is intended to boost confidence. Continued recovery still requires joint support from profit and capital commitments — if adjustments mainly reflect project delays and deleveraging, while corporate orders, customer demand, and long-term returns remain steady, the fall in price may improve the investment appeal of high-quality AI assets. Active buying may also be possible without waiting for all mechanical sales to end before entering the market. The rebound on Friday already shows that both can occur at the same time; however, defining the overall collapse as a “pure technical adjustment” will also ignore that construction costs and the pace of profit cashing out are being re-examined.