Stocks soared following the Democrats’ victory. Less than 24 hours later, the AI ​​business collapsed.

Wall Street’s tumultuous midterm election week began with a celebration among investors.

Stocks soared on Wednesday after Democrats swept both houses of Congress. The Dow (^DJI) jumped more than 1,500 points. The S&P 500 (^GSPC) rose almost 2%.

And in less than 24 hours, stocks reversed course, plunging Thursday as investors on Wall Street and Main Street dumped winners in artificial intelligence and chip stocks, sending the tech-heavy Nasdaq Composite (^IXIC) into correction territory.

The extraordinary reversal is just the latest boost in a year of wild swings, with the market’s best forecast for future volatility, the VIX (^VIX), hitting its highest level since President Trump extended the Iran war deadline in late March.

As the election results came in, Steve Sosnick, chief strategist at Interactive Brokers, was glued to his television, switching between CNN, Fox, MSNBC and Bloomberg while watching stock futures slide. When Sosnick folded, futures were still down about 1%.

Democrats took control of the House and Senate, resolving a major source of uncertainty for markets while introducing a specific complication to the country’s boom in artificial intelligence investment.

States where newly elected governors have promised to halt or suspend data center construction account for about 45% of planned U.S. data center capacity, according to Goldman Sachs.

In Texas, where more than half of the nation’s data center capacity is planned to be built, the stakes were particularly high. Democrat Gina Hinojosa had just won the gubernatorial race after promising a moratorium on approving new data centers.

The move caught the attention of one of the world’s most prominent business titans.

“Data centers in space look pretty attractive right now,” Elon Musk said on X on Wednesday morning.

On Wednesday morning, Wall Street saw positive sides in the blue wave.

Stocks took off. The Dow jumped 3%, its best day in months. The S&P 500 rose 1.6% and the Nasdaq rose 1.4%.

Investors appear to welcome the prospect of divided government, which could limit some of President Trump’s agenda. Oil prices (CL=F, BZ=F) also plunged, helping to ease inflationary fears.

And the removal of election uncertainty led to a sharp decline in the VIX. This decline may have encouraged volatility-sensitive trading strategies to buy stocks, adding upward pressure to the rally, according to Sosnick. As prices rose, more and more investors flocked.

But behind this rally, problems were brewing.

For more than a month, hedge funds have been selling stocks linked to the artificial intelligence boom to secure their year-end profits. Shares of chipmaking equipment companies Lam Research (LRCX) and Applied Materials (AMAT) had already lost about a third of their value over the previous month.

The prospect of a blue sweep bringing new restrictions on data centers was just another reason to get out of the AI ​​business.

On Thursday, these tensions became impossible to ignore. The Dow plunged more than 1,800 points, erasing Wednesday’s gains. The S&P 500 fell 4.4%. The Nasdaq collapsed 5.5%.

Keith Lerner, Truist’s chief market strategist, described the moves toward customers as “a sort of buyers’ strike” in tech stocks.

The VIX volatility index (^VIX) increased by up to 70%a move that has only happened eight times since 1991, according to CBOE data.

“They’re shooting the generals,” Nomura strategist Charlie McElligott wrote Thursday, describing the failure of the year’s most popular stock bets.

To Sosnick, the stock turnaround illustrates how quickly investor confidence can evaporate.

The election results have not changed. What has changed is investors’ willingness to take risks. And in a market that was already challenging the AI ​​boom, that was enough to turn Wednesday’s celebration into Thursday’s rout. As of Friday’s close, the S&P posted its worst weekly performance since June.

Follow David Hollerith on X @DsHollers.