Asia stocks crumble after AI rout rocks US markets

Asia's technology-focused markets faced a steep decline on Friday, following a significant drop in US stocks, which had not seen such a loss since a previous market turmoil a year and a half ago. South Korea's KOSPI fell by over 8%, prompting exchange circuit breakers and a 20-minute trading halt. Japan's Nikkei dropped by 5%. The volatility on Wall Street increased investor fear, with the Nasdaq losing 5.5% and $3 trillion wiped off S&P 500 companies.

The political uncertainty following Democrats' victory in the midterm elections has cast doubt on the AI boom, with investors concerned about the potential regulatory crackdown. Market participants pointed out that Asia's chipmakers and data center equipment suppliers, particularly in South Korea, Taiwan, and Japan, are particularly vulnerable due to the high investment in the technology sector.

Michael McCarthy, CEO of Moomoo, noted a significant shift in market sentiment, emphasizing the sharp swings in prices. The selling down suggests that investors are beginning to consider the potential hindrances, such as local opposition to building data centers, which have not been fully factored into the market yet. Meanwhile, bonds were expected to rise in Asia, while the US dollar weakened against haven currencies like the yen and Swiss franc.

Analysts predicted a potential rally in Treasuries, which could lead to an ugly day for semiconductor and memory stocks.