Shares plunge in Tokyo and Seoul after US tech rout

On Friday, Japanese and South Korean shares experienced a significant plunge, following a decline in US shares overnight due to concerns over potential regulatory changes resulting from the midterm election results. Tokyo's Nikkei 225 index fell 5.1% to 56,930 points, while Seoul's Kospi index dropped 8.5% to 4,923, prompting a 20-minute trading suspension to allow for stabilization.

Initially, investors had reacted positively to the Democratic Party's victory over President Donald Trump's Republican Party in the recent midterm elections. However, this optimism soon shifted to anxiety as concerns emerged that the political shift might negatively impact key investments in artificial intelligence (AI) data center infrastructure, which are crucial for economic growth.

Among the major US indices, the technology-focused Nasdaq suffered the most, closing down 5.5% in a sell-off that severely affected semiconductor stocks, particularly Nvidia. This marked the Nasdaq's worst percentage loss in terms of decline since April 2025. In South Korea, memory chip producers, whose advanced chips are vital for AI applications, also faced substantial losses, with Samsung Electronics down nearly 10% and SK hynix falling more than 11%.

The tech sector's downturn extended to Japan, with Tokyo Electron shares falling approximately 9% and Kioxia experiencing a 13% decline. The market-wide sell-off was primarily driven by concerns over stricter regulations on AI-related technologies imposed by the new government. These regulations could potentially slow down the construction of data centers, which are essential for training and running AI models.

Governments and technology companies globally are heavily investing in building data centers as part of a massive construction boom estimated to cost hundreds of billions of dollars, all aimed at supporting the rapid advancement of AI technology.