Asia stocks crumble after AI rout rocks US markets

Asia's tech markets experienced a sharp decline on November 6, following a significant drop in US stocks due to concerns over increased regulatory scrutiny and a slowdown in artificial intelligence development. South Korea's KOSPI fell more than 8%, prompting exchange circuit breakers for a 20-minute trading halt, while Japan's Nikkei dropped 5%.

The heightened market volatility is attributed to worries that Democrats, who gained power in the recent midterm elections, may curb the AI boom. The Nasdaq fell 5.5%, and investors lost $3 trillion from S&P 500 companies. Market participants are particularly concerned about the vulnerability of Asia's chipmakers and data center equipment suppliers, such as those in South Korea, Taiwan, and Japan.

Prior to the market crash, these sectors had already experienced declines on November 4 and 5. Market analyst Michael McCarthy noted the significant shift in investor sentiment, stating that turning points in the market often result in substantial price fluctuations. The Philadelphia Semiconductor Index dropped 12.2% overnight, and the Nasdaq, which initially rebounded after the midterm elections before falling, has now lost 12% from its October record high.

Bond prices were expected to rise in Asia, while the US dollar weakened against currencies like the yen and Swiss franc. Experts suggest that Treasury bonds could see further appreciation, and semiconductors and memory stocks may face a challenging period.