Nasdaq Enters a Correction as the Dow Gives Back 1,800 Points on an AI Chip Selloff

The Nasdaq Composite fell about 5.5% to close near 24,315 on 5 November, putting it into correction territory. The S&P 500 dropped roughly 4.4% to about 7,354, its worst day since the April 2025 tariff shock, and the Dow Jones Industrial Average lost about 1,833 points, or 3.4%, to around 51,523. The Cboe Volatility Index jumped about 70% to near 28, its highest close since late March.

The fall erased most of the previous day's gains. On 4 November the Dow had jumped more than 1,500 points, its best day since April 2025, after the midterm election result removed a source of political uncertainty. Reports of the 5 November figures differ slightly between outlets, so the numbers above are the ones that appear most consistently across sources.

What happened

The selloff was led by semiconductor and AI-linked names. Investors questioned how quickly heavy spending on AI infrastructure would turn into profit, and high-multiple chip stocks were the first to sell off. Money that had rotated into industrials and financials in the past few sessions did not hold, and the broader market followed the tech weakness lower.

Rate expectations added pressure. The Federal Reserve held its benchmark rate at 3.75%–4.00% at its last meeting, but the vote was split and some officials have argued for further increases. Futures markets have priced a substantial chance of a hike at the 8–9 December meeting, which makes richly valued stocks more sensitive to bond-market moves.

Why it matters for traders

• Volatility is the story. A VIX near 28 means option prices are rich. Buyers pay more for protection, and sellers face larger potential losses, so position sizing matters more than direction.
• Correction does not mean a trend. A 10% fall from a high is a common reset in a bull market, but it is not a forecast. The next few sessions will show whether the selling is exhausted or accelerating.
• Sector rotation can reverse fast. This week's move from tech to industrials reversed within a day. Traders who chased either side were caught out.
• Watch earnings guidance, not headlines. Heavy AI spending is only worth what it earns, so company guidance for chip and cloud demand will carry more weight than broad market moves.

What to watch

• Nvidia's results on 17 November, which will test the AI-demand story directly.
• The Fed meeting on 8–9 December and any change in the market's probability of a rate increase.
• Whether the VIX stays above 25, which would suggest the volatility is not yet over.

Educational content, not investment advice. Practise volatility-driven index and options trades risk-free in the Trading Titans paper trading app.