Tech firms suffer bloodbath as US midterms fuel AI fears
Trading boards were a sea of red in early business, with Seoul and Tokyo taking the brunt of the selling as traders fled to the hills
Asian technology firms experienced a significant decline on Friday as investors reacted to a Wall Street collapse driven by fears that Democrats might increase regulations on the AI industry following their strong victory in the US midterm elections. The market opened with a predominantly red trend, as traders rushed to safety due to uncertainty surrounding the sector, which had previously propelled stock markets to new heights just five months prior.
The historic "blue wave" that emerged from the vote on Tuesday had initially been viewed positively, as it might put pressure on US President Donald Trump to de-escalate tensions with Iran. However, concerns about the impact on AI development soon surfaced. Data centers faced opposition across the political spectrum, and several winners of the midterm elections had announced plans to curb such projects.
Analysts pointed out that investors were also worried by a call from progressive US Senator Bernie Sanders for a national moratorium on their construction. The election results amplified existing fears about the billions of dollars invested in the sector and the timing of returns, compounded by rising borrowing costs, which added to financial concerns.
Michael Hewson of MCH Market Insights noted that investors were selling off stocks due to apprehensions about greater opposition to AI buildout plans, particularly in Texas, where politicians might target Elon Musk's Tesla and SpaceX due to his support for Trump. The Nasdaq in New York dropped by 5.5 percent, its worst percentage decline since April 2022, while the S&P 500 and Dow Jones Industrial Average both fell by more than three percent.
Bloomberg reported that the Philadelphia Semiconductor Index experienced a sharp decline of around 16 percent, putting it on track for its worst week since April 2022. The S&P 500 saw a decline of over four percent, while the Dow Jones fell more than three percent. Trump attributed the market's downturn to Democrats, stating on his social media platform, "The Stock Market crashed today because the Dumocrats had a big Tuesday - So sad to see, you only have yourselves to blame!
President DONALD J. TRUMP." Seoul's stock exchange dropped nearly nine percent at one point, with major chip manufacturers SK hynix and Samsung down by 10 percent and eight percent, respectively. The Kospi more than doubled between December and mid-June, reaching a record high, but has since lost almost 50 percent. Tokyo experienced a seven percent drop, with Kioxia, SoftBank, and Advantest dropping more than 10 percent and eight percent, respectively.
Taipei's Taiex fell by eight percent due to a seven-percent decline in TSMC. Hong Kong, Shanghai, Sydney, and Singapore all saw declines of over one percent, while Wellington and Manila were also in the red. Neil Wilson of Saxo Markets commented, "The fear is a total momentum unwind as Democrats pace the frontier and kibosh data centre buildout... this looks totally overdone but the nature of sell-everything of this market means we need to look for some stability first."
The market's mood was further dampened by a rise in oil prices, extending Thursday's gains after a brief drop on the midterm results, as investors hoped for an end to the Iran war. Traders also monitored developments in the crisis, as US and Iranian leaders showed signs of progress earlier in the week. US jobs data was expected later in the day, following positive readings earlier in the week.
Written by urgent.news from The Hindu - Sci-Tech's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
