Asian Markets Reel as US AI Fears Trigger Tech Stock Sell-off

Asian markets experienced significant declines on Friday, mirroring a tech stock rout that originated in the United States. Trading was temporarily halted in South Korea as prices plummeted across the region. The global markets have been unsettled by a sharp drop in tech stock valuations, fueled by concerns that a Democratic victory in the US midterm elections could lead to increased regulatory oversight of Artificial Intelligence (AI) and potentially slow down the expansion of data centers in the country.

Japan's Nikkei index saw a steep fall of 6 percent, marking its most substantial single-day loss since April 2025. Indices in South Korea and Taiwan also plunged by over 8 percent shortly after trading opened, though they managed to recover some ground as authorities intervened to curb the selling pressure. The volatility index on Wall Street, often referred to as the "fear gauge," surged overnight on Thursday, while the tech-heavy Nasdaq composite index dropped 5.5 percent, erasing $3 trillion in market capitalization from S&P 500 companies. Investors are apprehensive that a Democratic-controlled government might impede the AI growth initiatives championed by President Donald Trump.

Al Jazeera's Katrina Yu reported from Beijing, stating, "It was a brutal morning for many investors here in Asia. We saw that the AI sell-off continues here across many countries." She added that while some major markets had partially recovered their losses, they remained "clearly in the red." Analysts suggest that geopolitical uncertainties are exacerbating existing vulnerabilities in the AI sector, which is already grappling with concerns about the returns on substantial investments in related infrastructure.

Dong Baozhen, chairman of asset manager Lingtong Shengtai, commented to Reuters, "The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone." He further questioned the resilience of AI bull markets elsewhere, noting, "The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped. Can AI bull markets elsewhere hold up on their own?"

Authorities step in

As Asian markets closed, some of their earlier losses were pared back as authorities took measures to stabilize the situation. Trading on South Korea's Kospi market was suspended due to the sharp decline. Finance Minister Lee Hyoung-il also relaxed regulations pertaining to leveraged investments by retail investors. In China, state-backed entities reportedly intervened by purchasing equities to stabilize the market, according to Al Jazeera's Yu. The Taiwan stock market concluded the day down 4.5 percent, a partial recovery from its earlier slump. For the week, the index recorded a 12.2 percent decrease, its largest weekly decline since 1991, according to LSEG data. The government of Taiwan, a significant chip producer, attempted to bolster confidence in the sector, with the economy ministry issuing a statement on Friday asserting that demand for emerging technologies like AI, high-performance computing, and cloud services is projected to continue expanding, thereby driving growth for tech companies.

Prominent Korean AI chipmakers Samsung Electronics and SK Hynix saw their shares fall by nearly 6 percent and 9.4 percent, respectively, after experiencing steeper losses earlier. TSMC in Taiwan dropped as much as 8.5 percent before closing down 4.7 percent. In Japan, Kioxia plunged 11 percent, and AI investor SoftBank Group also slid by 11 percent.

New regulations

The widespread selling suggests that investors are beginning to anticipate increased opposition to the development of data centers. Experts believe that markets have not yet fully accounted for the community costs associated with such construction projects. Toby Walsh, chief scientist for the AI Institute at the University of New South Wales, anticipates new regulations for data centers in numerous countries, including the US, Australia, and the United Kingdom. Walsh told Al Jazeera, "The developers were building them in a way that wasn’t actually getting social licence. They were building them in places where they didn’t need to build. You don’t have to build data centers in urban areas. You can build them in the middle of nowhere." He added, "I think it’s actually for the good of the tech industry in the United States that this has happened. We’re spending money a bit too quickly. And maybe this is the way to let that bubble deflate in a manageable way."