Asian markets follow US markets decline as artificial intelligence investment fears spread

Asian stock markets fell on Friday, following a sell-off led by technology companies in the United States, amid expectations that newly elected Democratic officials will derail the investment boom in artificial intelligence that has pushed global stocks to record levels.

South Korea's Kospi and Japan's Nikkei 225 closed down 6%, while Taiwan's benchmark Taiex index fell 4.5%.

Asian technology companies, which play a pivotal role in the global electronics supply chain, are seeing a rebound thanks to growing demand for components such as semiconductors needed to build massive artificial intelligence data centers.

US technology giants, such as Meta, Amazon and Google, have become known as “giant corporations” due to their huge spending on new data centers to power artificial intelligence, and a study conducted by Columbia Business School indicates that investment in infrastructure related to artificial intelligence was the main driver of US GDP growth almost at the end of last year.

However, negative reaction to the environmental and societal impact of new data centers has turned AI spending into a central issue in the US midterm elections. The Democrats won a majority in the House of Representatives and the Senate, and upended the balance of power in many contested seats in the states.

The landslide victory has raised concerns that Democratic lawmakers will now block or slow spending on new AI infrastructure, threatening a key driver of economic growth in both the United States and Asia.

Sharp technological fluctuations in Asia

This latest volatility comes on the heels of a year of sharp volatility in Asian markets, particularly the KOSPI, as investors faced challenges related to the sustainability of the AI boom, as well as the ultimate profitability of such massive investments.

The founder and CEO of Fibonacci Global Asset Management, Jung In-Yeon, said that the intense selling operations witnessed in the stock market on Friday may have been driven by investors reevaluating their expectations regarding investment in artificial intelligence and policies related to it.

However, he believes the demand for computing power will continue to grow, along with the need for memory chips such as those produced by Samsung Electronics and SK Hynix, the two largest publicly listed companies in South Korea.

Government officials in both South Korea and Japan acknowledged the recent volatility in their countries' stock markets on Friday.

Lee Hyung-il, an official at South Korea's Ministry of Economy and Finance, held a meeting on Friday to discuss the repercussions of the US midterm elections on the country's economy. According to the ministry, officials estimated that an impact on global markets "cannot be ruled out," stressing their intention to put in place proactive measures to prevent exaggerated reactions in the Korean stock market.

In light of the developments coming from the United States, technology stocks around the world have shown sensitivity to sudden shifts in investor sentiment this year. As both individual and institutional investors react to new data or developments related to artificial intelligence.

As enthusiasm surrounding artificial intelligence grows, Xu noted that Asian technology stocks are more closely linked to their American counterparts than ever before.

On Thursday, the American market witnessed a sharp selling wave that led to the evaporation of about $2.5 trillion in market value, as the Nasdaq index - which is predominantly technological - led this decline by 5.5%, recording its worst daily performance since April 2025, when President Donald Trump announced the imposition of comprehensive customs tariffs on almost all major trading partners of the United States.

However, Shaw believes that some market participants may be betting that a Democratic-controlled Congress may slow the pace of raising interest rates, reducing the cost of borrowing, which may contribute to boosting shares of technology companies and other sectors.

While traders are anticipating that the winners of the US midterm elections will take office early next year, analysts believe that global markets will likely remain sensitive to any changes in policies related to the technology sector and monetary policies.

“What markets hate most is uncertainty,” says Andrew Sullivan, who writes about Asian stocks in his newsletter, Asian Market Sense. “It's really an expression of their uncertainty about what will happen in January. So let's take a step back and convert some of our investments into cash that we can use later, once the dust settles and the situation becomes clearer.”