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The Korean stock market, the Kospi, experienced a dramatic collapse on Monday due to concerns about artificial intelligence (AI) and the potential delay of new AI data centers. Major U.S. indices, including the S&P 500, the Dow Jones Industrial Average, and the NASDAQ, all experienced sharp declines. The Kospi dropped more than 8% in its early trading session on Tuesday, triggering a circuit breaker for the first time.

Major semiconductor companies, including Samsung Electronics, SK Hynix, and Micron Technology, along with AI-focused firms such as Nvidia, SanDisk, Broadcom, and Intel, suffered significant losses. The root cause of this sell-off was the concern that the U.S. Democratic Party's victory in the midterm elections might lead to a nationwide moratorium on AI data center construction.

U.S. Senator Bernie Sanders, a prominent progressive, called for a halt to AI data center operations on social media platform X after the election. Market participants' anxiety was further heightened by Democratic Party gains in Texas, where the newly elected state representative urged the suspension of data center activities until safeguards are in place.

The fear that reduced AI data center construction could lead to a decline in memory demand prompted investors to sell semiconductor stocks first. The sell-off in semiconductor stocks was also driven by concerns raised by major cloud companies, including Microsoft and Meta, who expressed concerns about regulatory scrutiny and high costs associated with building new data centers in the U.S. Credit default swap (CDS) premiums, which measure the risk of default, also reached record highs, adding to market uncertainty.

Micron Technology suspended construction of a new factory in Taiwan due to labor disputes, while AI-related companies Qualcomm and Arm Holding reported weak performance, adding to concerns about the semiconductor outlook. The S&P 500, a broad technology-focused index, fell 5.52% on Tuesday. Major tech stocks, including AMD, Broadcom, and Nvidia, experienced substantial declines, with SanDisk, another memory and storage company, experiencing a sharp drop.

The market capitalization of the Magnificent 7, a group of major U.S. tech companies, fell to a record low of over $1 trillion.