Taiwan stocks fell sharply on Friday (6th). (Photo by reporter Tian Yuhua)
[Financial Channel/Comprehensive Report] The prospects for AI investment in the United States have changed, and Asian stock markets have been affected. Taiwan stocks fell 9% on Friday (6th), setting a record for the largest intraday drop and the largest decline in the history of Taiwan stocks. Japan's Nikkei Index and South Korea's Kospi also encountered fierce selling pressure. However, after an epic collapse on Thursday, U.S. technology stocks finally stopped falling and rebounded on Friday. According to foreign media analysis, the market is worried that the Democratic Party may strengthen supervision of the AI industry and data centers after its victory in the midterm elections, thereby dragging down the AI investment boom.
"CNBC" reported that U.S. technology stocks stabilized on Friday, and the Nasdaq 100 index, which is dominated by technology stocks, closed up 1.1%, after falling 6.3% on Thursday, the largest one-day decline since the COVID-19 epidemic. The S&P 500 Index also rose 0.3%. Compared with the previous trading day's 4.4% plunge, which evaporated US$2.8 trillion in market value in a single day, market sentiment has stabilized slightly.
However, the strong performance of the U.S. non-farm payrolls report in October raised market expectations for the Federal Reserve (Fed) to raise interest rates in December. Concerns that borrowing costs may rise also caused U.S. stocks to fall from their early highs.
The market continues to digest the results of the U.S. midterm elections, and several Democratic candidates who advocate restricting the development of the AI industry and data centers were elected. There are concerns that the Congress, which is about to be controlled by the Democratic Party, may strengthen supervision of the AI industry, especially infrastructure projects such as data centers, which may cause project delays and additional costs, further affecting the long-term profitability of AI investment.
Charu Chanana, chief investment strategist at SAXO Markets in Singapore, pointed out that the market is giving varying degrees of correction depending on how dependent companies are on the U.S. AI infrastructure investment cycle. As the AI craze has accounted for an increasing proportion of US stock gains and US economic growth, any factors that may shake the market's expectations for AI demand and growth are enough to cause investor uneasiness.
However, some analysts believe that Thursday's intense selling pressure may be an overreaction. It is just that some of the bubbles in the overheated market have subsided, and it does not mean that the AI investment boom has ended. Economist and investor Ed Yardeni described the recent declines as "just some bumps in the road" and may even help prevent the AI bubble from continuing to overheat.
The prospect of U.S. AI investment affects the global supply chain, and it is difficult for the Asian market to stay away. On Friday, Japan's Nikkei Index recorded its worst weekly performance since 2020. It fell 6% during the session and fell more than 20% from its recent high, entering the bear market. South Korea's Kospi Index even fell more than 8%, triggering a comprehensive market suspension of trading mechanisms. AI data center memory suppliers Samsung Electronics and SK Hynix once plunged more than 10% in early trading.
Taiwan is also facing impacts. Taiwan is an important center for the global AI chip supply chain and is also the headquarters of TSMC. The weighted index fell by more than 3,700 points on Friday. Tai Hui, chief market strategist of JP Morgan Asia Pacific, said that companies in Taiwan, South Korea and Japan are closely related to the global AI spending cycle, so it is not surprising that the Asian market has experienced such a sharp retracement after the sharp correction in U.S. stocks.
Chanana of SAXO Markets also pointed out that this has a great impact on the Asian market, because many hardware devices that support the development of AI in the United States are manufactured in Asia. In particular, South Korea's Samsung Electronics and SK Hynix are both important suppliers of commercial AI construction, and are therefore particularly sensitive to whether U.S. AI investment is slowing down; Taiwan plays a key role in advanced chip manufacturing.
As for the Chinese market, the Science and Technology Innovation 50 Index and the AI Index, which are dominated by technology stocks, once plunged 5% during the session, and then recovered part of the decline. Chanana believes that some of China's AI stock bubbles may have burst. However, unlike many investments in the United States, which are mainly driven by commercial considerations, China regards AI and semiconductor autonomy as a national strategic priority, and related investments may still be continued based on reasons such as technological independence, industrial competitiveness, and national security.
Despite the recent sharp correction in Asian stock markets, most indexes remain above where they were a year ago. South Korea's Kospi index increased by 25% year-on-year, Japan's Nikkei 225 index rose by 13%, and Taiwan's electronics index rose by 47%.
Tai Hui said that as long as global demand for computing power continues to grow, mid-term demand from semiconductor and memory manufacturers in the Asia-Pacific region is expected to remain healthy. He also used the metaphor of the gold rush to point out that even if gold mining locations are restricted, as long as the market demand for gold continues, companies that provide mining tools are still necessary.
