A fresh wave of fear gripped financial markets Thursday as investors repriced risk around artificial intelligence, sending the major U.S. indices to their steepest single-day losses in roughly 18 months.
The CBOE Volatility Index surged to a handle of 27, a level not seen since the period dominated by Iran war headlines, signaling that a significant new risk premium has entered the market.
Yahoo Finance Markets and Data Editor Jared Blikre framed the shift bluntly, noting that “the market was acting like all the war premium was getting sucked out of the market yesterday,” before adding, “well, guess what, we got a new risk premium being baked in and that is the AI sell off.”
Thursday’s damage was most concentrated in technology, where the XLK sector ETF collapsed 8%, marking its worst single session since the pandemic-era lows of March 2020.
Nvidia (NASDAQ: NVDA) shed 9% on the day, while Broadcom (NASDAQ: AVGO) dropped 10%, and Tesla (NASDAQ: TSLA) also fell 10%, extending its two-day decline to 13%.
SpaceX shares likewise tumbled 9% Thursday, bringing its two-session loss to 12%, as the selloff swept through the largest and most widely held names in the Nasdaq 100.
Blikre described the carnage in the Nasdaq 100 heat map starkly, saying the index’s biggest names were “getting taken out and shot,” with no major tech holding escaping the downdraft.
The broader market offered little shelter, with the S&P 500 finishing down more than 4% at its session lows and the Nasdaq closing off 5%, also at the day’s worst levels.
Small-cap stocks suffered nearly as badly, with the Russell 2000 dropping 4.5% to match the broader index in recording its worst day since the April 2025 tariff-driven sell-off.
Midcap stocks fell 3.85%, while the equal-weighted S&P 500 index, which had been outperforming the cap-weighted benchmark in recent weeks, still declined 3% on the session.
The rout erased all of Wednesday’s post-election gains for the Dow Jones Industrial Average, wiping out the optimism that had fueled a sharp blue wave rally just 24 hours earlier.
Early in the session, markets had appeared poised for a continuation of Wednesday’s advance, opening in positive territory before reversing course and grinding lower throughout the day.
The 10-year Treasury note yield fell 6 basis points amid the risk-off move, a notable shift given that the yield had traded north of 5% not long ago.
Communication services was the least damaged sector on the day, though it still finished in the red, as tech absorbed a disproportionate share of the selling pressure across the market.
Some individual stocks retained modest gains when measured from Monday’s close, suggesting the week’s overall damage, while severe, had not yet fully reversed the post-election advance for every corner of the market.
