Chip Stocks Crash 12%. What It Means for Your 401(k)

If your 401(k) retirement plan holds an S&P 500 index fund, every $10,000 in it at Wednesday’s close was worth about $9,564 when trading ended on Thursday, November 5, 2026. The S&P 500 fell 4.36% to 7,353.73. That was its worst day since President Donald Trump’s “Liberation Day” tariffs shook markets in April 2025.

Chip stocks took the hardest hit. The PHLX Semiconductor Index (SOX), a closely watched index of chipmakers, fell 12.25% to 9,011.14. That was its worst day since March 2020, when the onset of the Covid-19 pandemic roiled markets.

What Happened Thursday

Every figure in the table is an official daily close, and the 2026 column runs from the December 31, 2025 close. October 6 is the day the Nasdaq and the S&P 500 last peaked.

The Nasdaq closed more than 10% below its October 6 record, putting it in what traders call a correction. Nvidia fell 9.3% and erased its gains for 2026. Advanced Micro Devices (AMD) and Micron Technology each fell 17%. Qualcomm fell 9.5% after its smartphone chip sales missed Wall Street estimates. The Dow lost 1,833 points, wiping out the 1,569 points it gained on Wednesday. On Wednesday, the S&P 500 had risen 1.6% to 7,688.62 as oil fell more than 8% and investors seemed to hope that a divided government would mean steadier policy. Thursday’s drop more than erased that gain, which had been the market’s best day in three months. Wall Street’s fear gauge, the Volatility Index (VIX), surged roughly 70%, its biggest one-day jump in almost two years.

Why Chip Stocks Fell

Democrats won control of Congress on Tuesday, along with governorships in Texas, Georgia and Ohio, states that matter to the artificial intelligence (AI) data center buildout. Texas Governor-elect Gina Hinojosa campaigned on a temporary moratorium on new data centers. Wells Fargo estimates that 27% of planned data center gigawatts are in Texas. Fewer data centers would mean fewer purchases of AI chips.

The vote added to a slide that was already underway. On Election Day, November 3, the Nasdaq closed at 25,372.01, already 8.07% below its October 6 record of 27,599.79. AI stocks had been swinging for months on worries that expensive borrowing could slow the building of new data centers. “Hedge funds have been aggressively selling for weeks in this area,” said Mark Hackett, chief market strategist at Nationwide.

Earnings piled on. Intel’s outlook for its fourth quarter, issued October 29, calls for $15 billion to $16 billion in sales, well below the $17 billion Wall Street expected. Qualcomm said higher memory chip costs are hurting its sales.

State pushback on data centers started before the vote. Texas Governor Greg Abbott paused new data center permits in September, pending a grid audit, and Hinojosa campaigned on extending that pause. “We need to stop what we are doing with data centers until we have measures to protect Texans,” Hinojosa said.

What It Means for Your 401(k)

The S&P 500 is still up for the year. Even after Thursday, the index is 7.42% above its December 31, 2025 close. That figure counts price only and fits money that was already invested on December 31. Every S&P 500 close from July 30 through November 4 was above Thursday’s, so paycheck contributions invested in that stretch are worth less than they cost.

Chip stocks are well off their highs. The chip index is still up 27.22% for 2026, but it closed Thursday 38.43% below its June 22 peak of 14,634.72. A tech-heavy or chip fund took a far bigger hit than a broad S&P 500 fund.

Nvidia matters more than most single stocks. During the session it was by far the heaviest weight on the S&P 500, Associated Press (AP) reported, and a 1% move for Nvidia has more effect on the index than a 1% move for nearly any other U.S. stock.

Treasuries edged up. Nerves about AI stocks and bets on a slower data center buildout lifted government bonds, and the 10-year Treasury yield fell to 4.84%, its lowest in two months. AP put the move at 4.90% to 4.83%, a small gain for bondholders. The Treasury slice of a mixed fund helped a little, not a lot.

No sector escaped. All 11 sectors of the S&P 500 closed lower.

Withdrawing early has a price. Money you take out of a 401(k) before age 59½ is generally taxed as income, and you also owe an additional 10% tax unless an exception applies, such as leaving your job during or after the year you turn 55. Moving money between funds inside the plan is not a withdrawal.

Analysts read the day differently. “In our view, the risk-reward is improving for longer-term investors,” said Keith Lerner, chief investment officer at Truist Advisory Services. Ed Yardeni, president of Yardeni Research, welcomed the cooling instead: “We want a slowdown in the AI buildout. It was too frenzied and speculative.”

What to Watch Next

• Friday, November 6: the October jobs report. As of Thursday evening, the Dow Jones consensus estimate was 59,000 jobs added, with unemployment expected to hold at 4.2%.
• Asia on Friday: in early trading, South Korea’s Kospi fell more than 8% and triggered a 20-minute trading halt, and Japan’s Nikkei 225 fell more than 6%, putting it more than 20% below its June peak, CNBC reported.
• Texas permits: whether the Abbott pause becomes a longer moratorium under Hinojosa. CNN called the Texas result key to the sell-off.

For how the chip rally peaked in June, and the warning signs at the time, see the July look at the Magnificent Seven and chip stocks.