AI stocks just experienced their worst crash in years. If your 401(k) is in a core index fund, you’ve lost about a nickel on the dollar.
The S&P 500 (^GSPC) fell more than 4% on Thursday, its worst day in more than a year and a half, as chip stocks had their worst day since the pandemic began in March 2020. Nvidia (NVDA) had its worst day since the DeepSeek scare in January 2025.
Here’s what that looks like in dollars: For every $1,000 invested in an S&P 500 index fund at the October 6 market high, you have about $950 today. The same $1,000 worth of chip inventory would be worth around $710, and at Nvidia, around $790.
If your fund tracks the tech-heavy Nasdaq (^IXIC), the damage is closer to pennies on the dollar. The index closed Thursday in correction – the term Wall Street uses for a decline of 10% or more from a record high.
Meanwhile, the typical S&P 500 stock has actually risen slightly since that peak.
How? The S&P 500 gives the biggest say to the biggest companies. Chipmakers alone make up about 14% of the index, according to Yahoo Finance calculations. When they collapse, the fund’s hundreds of other companies help cushion the blow.
Stocks rebounded Friday after a strong jobs report showed employers added 165,000 jobs in October, more than double economists’ expectations.
But this cushion goes both ways. AI-related companies make up a significant portion of most index funds and have driven much of the market’s gains in recent years. If the AI slide deepens, your 401(k) will feel it much more.
The concern comes from the data centers that run on these chips. Democrats took control of Congress this week, and candidates from both parties campaigned against them. The market rout reflects “uncertainty about the cost and pace of data center construction,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note Thursday.
The story offers some comfort – with an asterisk. The S&P 500 is up 12 months after every midterm election since 1950 – a record of 19 for 19 – according to calculations by Yahoo Finance. But that’s only 19 cases, and none resulted in such a big AI boom. Thursday could also be a warning sign: It was the second worst day for the Dow Jones Industrial Average (^DJI) following a midterm period dating back to 1896.
Steve Sosnick, chief strategist at Interactive Brokers, has a simple message for nervous investors.
“Don’t panic. Just keep your head around you,” Sosnick said Friday on Yahoo Finance’s “The 8:30.” “There are reasons to sell. There are reasons to buy.”
In-house AI tools helped analyze interview transcripts, research, and write this article. Humans reviewed, edited and fact-checked the material before publication.
Follow Jared Blikre on X @SPYJared or email him at jaredblikre@yahooinc.com.
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