Breaking: Musk's $300B loss and the Magnificent Seven's trillion-dollar rout

Elon Musk’s companies suffered a severe financial blow on Thursday as Tesla and SpaceX lost more than $300 billion in combined market value. Tesla shares fell nearly 11 percent while SpaceX dropped 8 percent, marking a difficult week for the entrepreneur. This decline occurred alongside a broader market rout that wiped out approximately $1 trillion in value from the Magnificent Seven technology companies in a single trading session. The drop in these major tech stocks contributed significantly to the overall sell-off that defined the day for US investors.

The market turmoil was fueled by the results of Tuesday’s midterm elections, where Democrats secured control of both the House and the Senate. Voters in key states rejected measures supporting data center development, a move that investors fear could slow the artificial intelligence buildout. In Texas, Democrat Gina Hinojosa won the governor’s race after campaigning on an immediate moratorium for new data center construction. This political shift heightened concerns that the facilities central to the AI trade will face new regulatory hurdles in states with large planned projects, including Ohio and Texas.

Musk’s political spending also played a role in the narrative surrounding the market’s reaction. He spent nearly $450 million backing Republican campaigns during the election cycle. A significant portion of this, at least $45 million, went toward supporting Ken Paxton for the Texas Senate seat. That bet failed when the Texas Senate race went to the Democrats on Tuesday night. The combination of high-profile spending and the subsequent loss of a key state seat added to the scrutiny on Musk and the tech sector’s political influence.

For local readers in Riverside and across California, a day like this has direct implications for personal finances. The sharp decline in stock indices means that retirement accounts and savings held in mutual funds or index funds have likely decreased in value. This is not just a theoretical loss on a screen; it affects the projected income for those near or in retirement. Small investors who have recently bought into tech stocks may find their portfolios significantly smaller than they were at the start of the week. The drop in the S&P 500 and the Nasdaq Composite reflects a broad devaluation of US corporate assets.

The selling pressure was intense across all sectors of the S&P 500, with the index falling 4.3 percent. This was its worst day since April 2025, when President Trump announced sweeping global tariffs. The Nasdaq Composite fell 5.5 percent, its worst performance in 18 months. This drop pushed the index into correction territory, which is defined as a fall of at least 10 percent from a recent high. The Dow Jones Industrial Average also fell more than 1,800 points, a drop of 3.4 percent, erasing the gains made the previous day.

Chip stocks led the rout, with the Philadelphia Semiconductor Index falling more than 12 percent. Nvidia, the biggest faller in the Dow, lost 9.2 percent, shedding more than $400 billion in market value. Other major players like AMD and Micron each fell more than 17 percent. The iShares Semiconductor ETF fell 12 percent, its worst day since the pandemic breakout in March 2020. This sector has been a primary driver of market growth in recent years, so its decline has a magnifying effect on overall market sentiment and investor confidence.

Market volatility spiked sharply as investors reacted to the news. The Cboe Volatility Index, often called the fear gauge, jumped as much as 5.7 points to above 28. This was its highest reading since March 31, 2026. By midday, nearly 800,000 VIX call options had traded, which is 3.5 times the 30-day average. This surge in trading activity indicates that investors were rushing to protect their portfolios against further declines. The 10-year Treasury yield fell to 4.83 percent as investors sought safety in bonds.

Analysts offered varied perspectives on the sustainability of the sell-off. Neil Wilson, an investor strategist at Saxo UK, described the event as a complete capitulation-level event in tech stocks. He noted that the nature of sell everything in this market means investors need to look for stability first. Dan Ives, a tech analyst, stated that there is no way to sugarcoat the fact that Democrats taking control will create major hurdles for AI and tech legislation. He added that the midterm results are a clear sign the pace of data center build-out will start to slow.

Ted Parkhill, founder of Incline Investment Management, observed that the market is moving from the promise of AI to the price of AI. He emphasized that while AI will be transformative in the long run, not every AI-related stock is priced appropriately, leading to expected turmoil. Susannah Streeter, chief investment strategist at Wealth Club, said fresh panic over the AI trade has hit Wall Street hard. She noted that fears about returns on AI infrastructure are colliding with the prospect of a sharp slowdown in data center construction.

Gene Goldman, chief investment officer at Cetera Financial Group, suggested the sell-off had become exaggerated. He predicted a recovery, noting that corrections in a bull market are typically short-lived. Frank Cappelleri, founder of CappThesis, pointed out that the Nasdaq was higher 12 months after the election in all but one of 13 midterm cycles since 1974. However, he cautioned that the path can be a volatile one, citing the 2018 cycle where a sharp December sell-off followed the initial rally.