Breaking: Musk's $300 Billion Loss and the Magnificent Seven's $1 Trillion Rout

Elon Musk’s companies suffered a historic collapse on Thursday as the broader market plunged, with Tesla and SpaceX losing more than $300 billion in combined value. The sell-off was part of a wider rout that saw the so-called Magnificent Seven technology companies shed approximately $1 trillion in market value in a single trading session. The decline in Musk’s holdings was significant, with Tesla falling nearly 11 percent and SpaceX dropping 8 percent. This financial hit coincided with a difficult week for the billionaire, who had spent nearly $450 million backing Republican campaigns. A specific portion of that sum, at least $45 million, was directed toward supporting Ken Paxton for the Texas Senate seat, a bet that failed when Texas went to the Democrats on Tuesday night.

The market damage extended far beyond Musk’s portfolio, hitting the entire technology sector as investors grew anxious about the sustainability of the artificial intelligence boom. The Nasdaq Composite fell 5.5 percent, marking its worst day in 18 months. The index closed more than 11 percent below the record it set last month, which places it firmly in correction territory. A correction is defined as a fall of at least 10 percent from a recent high, while a 20 percent decline would signal a bear market. The selling spread through every sector of the S&P 500 and gathered pace as the day progressed, leading to a widespread loss of confidence in tech stocks.

The Dow Jones Industrial Average also suffered heavily, falling more than 1,800 points to close at 51,868. This represented a drop of 3.4 percent and erased all the gains the index had made on Wednesday. The S&P 500 fell 4.3 percent, its worst performance since April 2025, when President Trump announced sweeping global tariffs. The volatility in the market was starkly illustrated by the Cboe Volatility Index, or VIX, which jumped as much as 5.7 points to above 28. This was its highest reading since March 31, 2026, the day after the S&P 500 bottomed during the Iran war tensions. The VIX was up 61 percent on the day, with nearly 800,000 VIX call options trading by midday, a volume 3.5 times the 30-day average.

The catalyst for the crash was the Democrats' sweep of the House and Senate in Tuesday's midterm elections. Democrats in races across the country campaigned on slowing the spread of data centers and artificial intelligence infrastructure. There were dozens of measures on ballots around the country aimed at restricting data center development, and voters rejected these facilities in a series of local ballots. In Texas, Democrat Gina Hinojosa won the race for governor after campaigning on an immediate moratorium on new data center construction. This victory, along with Democratic wins in states with large concentrations of planned data centers such as Ohio, heightened concerns that the facilities at the heart of the AI build-out would face new regulatory hurdles.

Investors are now weighing whether tighter state-level restrictions could slow data center construction, which would pressure companies tied to the artificial intelligence trade. This local political shift is compounding broader concerns that the huge sums being spent on AI may not pay off, leading to fears of a bubble. Neil Wilson, an investor strategist at Saxo UK, described the situation as a complete capitulation-level event in tech stocks. He stated that the fear is a total momentum unwind as Democrats pace the frontier and kibosh the data center buildout. Wilson noted that while the market looks totally overdone, the nature of sell-everything events means investors need to look for some stability first.

Dan Ives, a tech analyst, emphasized that there is no way to sugarcoat the impact of Democrats taking control, especially over the Senate. He argued that this will create major hurdles for AI and tech legislation in the Beltway over the next two years. Ives said the midterm results are a clear sign that the pace of data center build-out will start to slow. Ted Parkhill, founder and chief executive of Incline Investment Management, added that the market is moving from the promise of AI to the price of AI. He noted that while AI will be transformative in the long run, not every AI-related stock is currently priced appropriately, and there is going to be a lot of turmoil.

Susannah Streeter, chief investment strategist at Wealth Club, said fresh panic over the AI trade has hit Wall Street hard. She explained that fears that the vast sums poured into AI infrastructure may not deliver the returns investors have been banking on are now colliding with the prospect of a sharp slowdown in data center construction. Gene Goldman, chief investment officer at Cetera Financial Group, said the sell-off had become exaggerated as selling accelerated through the day. He predicted a recovery, noting that corrections in a bull market are typically short lived and that while it is ugly right now, they do think we will see a bounce back soon.

The tech industry has also responded to the growing backlash against data centers. Greg Brockman, president and co-founder of OpenAI, speaking at the WSJ Tech conference in Napa, California, on Wednesday evening, said everyone had been surprised by the reaction to data centers. He stated that more work was needed to bring communities on board and that from San Francisco trying to build infrastructure in Texas and Georgia, you cannot just tweet and say this is going to be good. Dina Powell McCormick, president of Meta, told the same conference that the industry needed to put more effort into making the case for AI. She said she thinks we need to double and triple down on telling the story. The 10-year Treasury yield fell to 4.83 percent as investors bought bonds as a haven, while the FTSE 100 in London closed down 46 points, or 0.4 percent, at 10,782.66.