Key Points
The Nasdaq tumbled 5.5% on Thursday, closing about 12% below its October 6 record and confirming a correction, as chip stocks collapsed on fears that a Democratic Congress and new governors will slow the AI data center buildout.
AppLovin jumped 31.0% to $356.10 after third-quarter revenue grew 55% to $2.18 billion and it guided fourth-quarter sales to $2.365 billion to $2.395 billion, well above the roughly $2.25 billion analysts expected.
AppLovin turned $1.4 billion of free cash flow in the quarter, about 64% of revenue, and its board added $3.2 billion to its buyback authorization.
Chipmakers took the worst of it: AMD plunged 17.3%, Micron plunged 17.5%, Qualcomm tumbled 9.5%, Arm plunged 13.1% and Nvidia tumbled 9.3%.
Stocks sold off across the board: the Dow fell 3.4% (1,834 points), the S&P 500 fell 4.4% and the Nasdaq tumbled 5.5%.
One day after Wall Street celebrated the midterm results, it changed its mind.
On Wednesday, investors bought Big Tech on the theory that limits on new data centers make existing ones more valuable. On Thursday, they decided the limits were the bigger story. The Nasdaq tumbled 5.5%, and the selling hit almost everything with a chip inside it.
Almost everything. AppLovin jumped 31.0%.
The Day the AI Trade Broke
The trigger came from two chip reports Wednesday night.
Qualcomm's handset chip revenue fell 26% to $5.14 billion as smartphone makers cut purchases and Apple-related sales faded, and its forecast for the current quarter came in light. Arm beat estimates with revenue up 27% to $1.44 billion, but royalty revenue grew just 8%, and its outlook only edged past Wall Street's numbers.
Then the politics landed on top. According to NBC News, numerous Democrats who won races for governor, attorney general, Senate and House have pledged to slow or halt data center construction, with Texas, Ohio, Michigan and Georgia, all major data center markets, of particular concern. Investors began asking what happens to chip demand if the buildout slows.
The answer showed up on the screen. AMD plunged 17.3% to $404.40, wiping out its entire post-earnings gain just one day after reporting record data center revenue. Micron plunged 17.5%. Qualcomm tumbled 9.5%, Arm plunged 13.1% and Nvidia tumbled 9.3%. According to Reuters, the Philadelphia Semiconductor Index fell as much as 11% during the session, its worst performance since March 2020.
Even yesterday's winners gave some back. Amazon fell 2.2% and Microsoft fell 3.6%, giving back part of the rally we covered when voters said no to data centers and Amazon jumped 6%. The "scarce assets" argument held for exactly one session.
Why AppLovin Went the Other Way
AppLovin doesn't build data centers. It doesn't sell chips to people who do. It uses AI software to place ads inside mobile games and apps, and it gets paid when those ads work.
And they are working. Third-quarter revenue grew 55% to $2.18 billion, ahead of the roughly $2.08 billion analysts expected. Net income rose 72% to $1.44 billion, an industry-leading 66% net margin. Earnings came in at $4.30 a share versus estimates near $4.07.
Then came the part that moved the stock. AppLovin forecast fourth-quarter revenue of $2.365 billion to $2.395 billion, well above the roughly $2.25 billion Wall Street expected, and adjusted EBITDA of up to $2.025 billion.
The cash is real, too. AppLovin generated about $1.4 billion of free cash flow in the quarter, roughly 64% of revenue, and spent $1.4 billion buying back and withholding 4.1 million shares. The board added another $3.2 billion to its repurchase authorization, bringing the total to $3.6 billion.
AppLovin closed at $356.10. In the afternoon, Dow Jones Market Data said the stock was on pace for its biggest one-day gain since November 2024.
The Market Is Sorting AI Winners From AI Spenders
Here is what makes Thursday so important.
For most of this year, investors treated "AI" as one trade. Chipmakers, cloud giants, power companies and software names rose together. That trade has now split in two.
On one side are the companies that need the buildout to keep accelerating: chip designers, memory makers, data center landlords and the power suppliers behind them. Their fortunes depend on hundreds of billions of dollars in construction, and Tuesday's election just put a question mark over that spending.
On the other side are the companies already making money from AI that runs on capacity that exists today. AppLovin is the clearest example. Its customers don't care how many new data centers get approved in Texas. They care whether their ads bring in paying users.
That doesn't make AppLovin a safe stock. Even after Thursday's surge, it was still down about 46% for the year in mid-afternoon trading, according to Dow Jones Market Data, and at less than half its all-time closing high of $733.60 from December 2025.
The Rest of the Market
The selling spread well beyond tech. The Dow fell 3.4%, or 1,834 points, erasing all of Wednesday's 1,570-point gain. The S&P 500 fell 4.4%, a drop CNBC said put the index on track for its worst day since April 2025, and the Nasdaq tumbled 5.5%.
The economy isn't the problem. Weekly jobless claims fell to 189,000, matching a 57-year low and beating the 196,000 economists expected, according to the Labor Department. As Dylan argued recently, the economy is stronger than you thought, and Thursday's data backed him up.
Investors fled to safety instead: the 10-year Treasury yield fell toward 4.83% during the session. Oil bounced about 2% after Wednesday's plunge of more than 8%.
What Lands Next
The October jobs report arrives Friday morning. Vistra also reports before Friday's open, giving investors their first read from a power company after the election.
After Thursday's close, Cloudflare, Airbnb, DraftKings and Microchip Technology were scheduled to report, too late for this article.
The bigger question is whether Thursday was a one-day panic or the start of a longer reset. Either way, the market has stopped asking "Is this AI?" and started asking "Who is actually getting paid?"
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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