Asian stock markets, which are home to artificial intelligence (AI) concept stocks such as Taiwan, South Korea and Japan, are facing new policy variables brought about by the U.S. midterm elections.
"Bloomberg" reported that Asian stock markets with artificial intelligence (AI) concept stocks such as Taiwan, South Korea and Japan are facing new policy variables brought about by the U.S. midterm elections. The election results may reshape various industries from technology trade and clean energy to national defense.
If the Democratic Party sweeps both houses of the House of Representatives and the Senate, the construction of the AI industry and data centers will be subject to stricter scrutiny. Strategists pointed out that if the Republicans unexpectedly retain control of both houses, policies will be more sustainable, which may benefit Taiwanese and South Korean chipmakers and other suppliers supporting the U.S. technology boom. Currently, polls show that the Republicans will lose control of the House of Representatives, but the final results of the Senate reelection are not yet clear.
In addition to technology stocks, if the Democratic Party performs better, Chinese clean energy companies will benefit. If the Republicans continue to control Congress, Japanese defense companies may perform better. Swiss bank Lombard Odier said that if Congress is controlled by the Democratic Party, a divided government may indirectly boost the stock market by curbing fiscal expansion and suppressing government bond yields.
The U.S. midterm elections come at a critical time for Asia's AI trade, with investors already facing rising borrowing costs, how long the memory chip boom will last and whether debt-driven spending on AI infrastructure will provide adequate returns. The U.S. midterm elections have added new uncertainties, as issues including AI security, data center construction and electricity costs have gradually become highly politicized in Washington.
Philip Wool, director of portfolio management at Rayliant Global Advisors, said: "If the Democratic Party sweeps the election, these issues may become more pressing, and these concerns may trigger another pullback in AI concept stocks. Any factors that pose a threat to AI will seriously affect the sentiment of Taiwan, South Korea and Japanese stock markets."
Asia plays a major role in the AI investment boom, with Taiwan and South Korea supplying many of the advanced semiconductors and other critical hardware that underpin the construction of U.S. data centers. If the Democratic-controlled Congress intensifies scrutiny of the AI industry, including requiring AI developers to bear more of the cost of powering data centers, it could make Asia, which relies on the U.S. market, vulnerable. Any measures to increase infrastructure and power costs or increase the difficulty of building data centers may exacerbate investors' concerns about huge investments and debt burdens in the AI field.
Afdhal Rahman, executive director of the Wealth Advisory Department of OCBC Bank, said that potential changes in the construction of AI infrastructure, data center development or technology restrictions in the United States may eventually affect the Asian supply chain.
Nonetheless, investors generally expect global demand for AI computing power and infrastructure to remain strong regardless of which party controls Congress. Pruksa Iamthongthong, head of Asia Pacific equities at Aberdeen Investments, said that Taiwanese and South Korean chip manufacturers remain an important part of global AI investment, which allows them to respond well to different election results.
