Tokyo and Seoul in deep red: why the flight from tech after the midterms sinks the stock markets in Asia
The markets of Tokyo, Seoul and Taipei recorded heavy losses in the wake of Wall Street, held back by fears about infrastructure for artificial intelligence after the midterm elections.
Quick Look
- Collapse of Asian stock markets led by the technology and semiconductor sectors, with Tokyo down 5.96% and Seoul 6.02%.
- Investors fear that Democrats in the US Congress may slow down the development of data centers and artificial intelligence.
AI-generated summary
Why It Matters
Asian financial markets are affected by tensions on Wall Street and the outcome of the midterm elections in the United States.
BEIJING – The fear that the Democrats' conquest of the majority in the US Congress could slow down the development of infrastructure and investments in the artificial intelligence sector turned into a Friday of fear for Asian markets, following a wave of selling in the technology sector on Wall Street. Tokyo, Seoul and Taipei with heavy negative signs, Hong Kong and Shanghai are weak.
Stock markets plummet in Asia
Japan's Nikkei 225 index lost 5.96%. The declines were driven by major AI-related stocks such as Kioxia, SoftBank Group and Advantest. The South Korean Kospi had to suspend trading for twenty minutes and closed at -6.02%, the lowest level since the end of March: with the two chip giants - Samsung and Sk Hynix - at -6.35% and -10.44% respectively. Taipei's Taiex closed down 4.5%, partially recovering the collapse recorded at the opening, with the Taiwanese TSMC, world leader in semiconductor production, losing up to 8.5% before closing at -4.7%. Shanghai (-1.10%) and Hong Kong (-1.27%) were slightly better.
The midterm effect
The sell-off in Asia follows a sharp decline in US stocks, with the Nasdaq hitting a six-month low. Investors fear that the American Democrats, who emerged victorious in this week's midterm elections, could put the brakes on the artificial intelligence boom. According to data from Cleanview, a market analysis firm, cited by Bloomberg, about 40% of the data center capacity being built in the United States is expected to be built in states where newly elected governors have promised to block or suspend such projects. A Democratic-controlled Congress is fueling concerns about the growth prospects for chipmakers and data center providers.
“Asian markets, heavily weighted towards the semiconductor sector, may now face some of the strongest headwinds, as exposure to global AI supply chains make them particularly vulnerable to another sell-off,” Hebe Chen, market analyst at Vantage Global Prime, told Bloomberg. A possible slowdown in the artificial intelligence sector will have economic repercussions throughout Asia, several analysts claim: a large part of production is concentrated on the continent and if demand for chips, cooling systems, or any product linked to AI drops, this will weigh on the growth of exports. Major Asian exporters could take a hit if the brakes are pulled on AI.
What to Watch
AI outlook — possibilities, not facts
Asian chipmakers will face strong headwinds in the markets.
Likely · Within weeks
Open Questions
- What concrete measures will newly elected governors take against data centers?
- How will Asian monetary authorities react to the stock crash?
