(LEAD) Seoul stocks crash for 2nd day on AI rout after U.S. midterms

Seoul stocks experienced a second day of decline on Friday, November 6, as markets grappled with the prospect of a Democratic Congress potentially slowing down the construction of data centers for artificial intelligence (AI). The Korean won depreciated sharply against the U.S. dollar. The benchmark Korea Composite Stock Price Index (KOSPI) fell by 6.02 percent, closing at 5,059.69, down 324.11 points.

This significant drop marked the lowest closing point since the index had plummeted over 8 percent earlier on the same day, triggering a 20-minute trading suspension initiated by the country's bourse operator.

Trading activity was relatively moderate, with a volume of 297 million shares amounting to 27.5 trillion won (approximately US$20.3 billion). The majority of the losers outnumbered the winners, with 757 stocks falling while only 131 managed to rise. Foreign investors were notably net sellers, offloading a combined 2.77 trillion won worth of stocks, while retail and institutional investors collectively purchased 2.3 trillion won worth of shares.

According to Lee Kyoung-min, an analyst at Daishin Securities, the market plunge can be attributed to concerns about the U.S. Congress potentially tightening regulations on AI data centers. These apprehensions have extended to the entire AI value chain, including semiconductors. Five states that flipped to the Democratic Party in the midterm elections, including Texas, are considered major locations for AI data centers, according to Lee.

However, he suggested that the likelihood of the U.S. legislators completely suspending the build-out of data centers is low, deeming the market reaction as excessive.

Most major players on the Seoul stock exchange closed lower on Friday. Samsung Electronics, a top-cap company, saw a 6.35 percent drop, bringing its price to 188,700 won. SK hynix also experienced a significant decline of 10.44 percent, closing at 1,132,000 won. Hyundai Motor, a car manufacturer, decreased by 4.77 percent, reaching 279,500 won. Defense firm Hanwha Aerospace suffered a 2.94 percent drop, settling at 660,000 won, and financial firm KB Financial declined by 3.82 percent, ending at 151,000 won.

Despite the overall market downturn, some IT shares managed to rise. Naver, a portal operator, increased by 2.87 percent to 190,200 won, while Samsung SDS climbed by 6.34 percent, reaching 218,000 won. The Korean won was quoted at 1,356.6 won against the U.S. dollar as of 3:30 p.m., marking a 14.5 won decrease from the previous trading session.