Is the AI market over or is it temporarily retreating? Expert: The key lies in whether the plummeting stock price is "distressing"

The Democratic Party swept the U.S. midterm elections, sparking fears of stricter regulation of artificial intelligence (AI) and obstacles to data center construction. The global sell-off in technology stocks intensified. Many market participants are trying to clarify whether this plunge is the beginning of a large-scale correction in the stock market. Kazuki Sawamura, a strategist at Shinkin Asset Management in Tokyo, said, "It is currently difficult to judge whether the AI ​​rally is over; the key is whether the decline in stock prices is limited to worsening investor sentiment, or has actually caused damage to corporate profits."

Nasdaq suffered its largest single-day decline since "Liberation Day" in April 2025 on Wednesday. Asian stocks that opened the next day also fell sharply, and the stock markets of Taiwan, South Korea and Japan were severely hurt. The Nikkei 225 plummeted 6% on the 6th, the largest single-day decline since April last year, and fell more than 20% from the highest point of the June band, falling into a bear market. Semiconductor-related stocks Avant Test once fell 12.2%, Tokyo Power Technology fell 7.3%, SoftBank fell 11.6%, and Kioxia fell nearly 10%. At the end of the day, the decline converged.

South Korea and Taiwan dropped more than 8% after the opening, and South Korea's Kospi triggered the circuit breaker mechanism. After the authorities tried to curb the selling sentiment, prices stabilized at midday. Taiwan stocks closed down 4.5%, and Korean stocks closed down 6%.

South Korean memory duo SK Hynix and Samsung Electronics closed down 10.4% and 6.4% respectively. South Korea's Finance Minister Lee Hyung announced on Sunday that he would temporarily relax regulations on leveraged investments by retail investors for three months to avoid large-scale "head-cutting" and forced liquidation of retail investors' positions due to sharp declines in stock prices.

The day before, Wall Street's fear indicator, the VIX volatility index, had its largest one-day rise since December 2024. The S&P 500 fell more than 4%, losing $3 trillion in market value, and the Nasdaq plummeted 5.5%. The market value of the Nasdaq 100, which tracks the 100 largest non-financial companies in the index, shrank by $2.5 trillion. Philadelphia Semiconductor fell more than 12%.

The selling wave showed signs of slowing down. S&P 500 futures rose 0.3% on the 6th, and Nasdaq 100 futures also recovered from the previous day's 6.4% decline, with the contract price rising 1.4%.

According to data from market intelligence company Cleanview, about 45% of planned data centers are located in Texas, Georgia, Michigan, Nevada and Ohio, where the elected governors have threatened to stop or suspend related construction.

Many market participants are trying to figure out whether this plunge is the beginning of a large-scale pullback in the stock market, or whether it is just a temporary pullback. John Woods, chief investment officer of Lombard Odier, said, "I ask myself if the AI ​​market is over? I don't really feel that way." He added that Democrats have softened their rhetoric on suspending Texas data center construction.