The pitch for European equities in 2026 has been consistent: lighter AI exposure, steadier earnings, a reasonable hedge against a US-centric tech unwind. That argument survived Wednesday’s post-midterm rally. It did not survive Thursday and Friday.
Where the damage stands
- S&P 500: dropped 4.36% to close at 7,353.73 on Thursday, its worst session since April 2025.
- Nasdaq Composite: declined 5.52% to close at 24,315.00, entering correction territory.
- Nasdaq-100: fell 6.36%, its worst day since March 2020.
- Stoxx 600: dropped 1.6% to 644.72 by early Friday, wiping out its gains for the week and leaving it down roughly 0.2%.
- Nikkei 225: officially entered a bear market on Friday after a decline of nearly 6% that pushed the index more than 20% below its June peak.
- Kospi: briefly fell more than 8%, triggering a circuit breaker that halted trading for 20 minutes.
Global markets swung sharply this week as investors initially anticipated that a Democratic sweep of Congress would accelerate tighter scrutiny of the AI trade, before concerns over US data center regulation and AI-related spending sparked a broad tech selloff. The Philadelphia Semiconductor Index fell about 12% on Thursday, its worst day since March 2020.
Europe: the failed hedge
The Stoxx 600’s relative AI-lightness was supposed to be a buffer. European equities were less affected than markets in the United States and Asia during the wider technology selloff, partly because of the comparatively smaller representation of AI-focused companies in European stock indices. That structural advantage bought roughly 48 hours.
European shares joined the global selloff, wiping out their weekly gain as concerns over the Democratic sweep of Congress and its implications for the AI trade triggered losses across every sector. Media, healthcare, and retail led broad-based declines, falling over 2% each, sectors with no meaningful AI exposure at all. When the selling reaches healthcare and media, the word “diversification” stops meaning what investors thought it did.
Fears that a Democrat-led Congress could seek curbs on AI data-center spending added to concerns over weak returns, lofty valuations, and debt-fueled investment. A slowdown in AI spending could weigh on the global economy that has been propped up by Big Tech investments. That second sentence is the one traders should sit with. The concern is no longer confined to chip stocks.
Stocks in focus
Nvidia lost more than $440 billion in market value on November 5, with shares closing down 9.26% at $181.60. The stock has extended a month-long rout that has erased roughly $1.4 trillion in market value and wiped out its entire 2026 gain, now down nearly 24% from its early October record.
South Korean chipmaker SK hynix plunged more than 10%, while Samsung Electronics fell more than 6% on Friday. Samsung and SK hynix together account for roughly half of the Kospi’s market capitalization, making the benchmark highly sensitive to semiconductor price swings. That concentration explains why a circuit breaker in Seoul carries a different weight than a broad-market halt elsewhere. The two companies lost roughly ₩193 trillion in combined market value on November 5 alone, intensifying pressure on the benchmark before Friday’s circuit breaker.
SMH, the VanEck Semiconductor ETF, fell 11.21% on Thursday. AMD fell 17.3%, Micron 17.5%, and Arm 13.1%, while Broadcom dropped 10.4% and Taiwan Semiconductor fell close to 10%. The average decline across eight of the largest chip stocks was 13%, about three times the S&P 500’s 4.4% drop.
What to watch next
Three things matter most heading into the Friday session and beyond. First, whether the Stoxx 600 finds any support near 644 or accelerates lower. Second, South Korea temporarily waived a rule requiring brokerages to maintain collateral worth at least 140% of margin loans, to limit forced selling. Third, Nvidia reports earnings on November 17, 2026. Nothing changed in Nvidia’s own numbers, which arrive on that date, but the market will need that report to reframe the AI demand question before any durable recovery takes hold.
The Stoxx 600 falling alongside Seoul and Tokyo is not a signal that European stocks are equally dangerous. It is a signal that when real fear arrives, correlations compress toward 1. Position sizing matters more than geography right now.
