Asia's AI Stocks Plunge $550B; Bitcoin Surges 4%

Asian Markets Plunge Amid AI Spending Fears, Wiping Out Billions

Asian stock markets experienced a significant sell-off today, with chipmakers bearing the brunt of the decline and erasing nearly $550 billion from the markets of South Korea, Taiwan, and Japan. The sharp downturn was fueled by investor anxieties that potential new regulations on artificial intelligence and data centers, following the Democratic Party’s midterm election victories, could curb the sector’s substantial spending boom.

South Korea bore the brunt of the losses, with its stock market shedding approximately $203 billion. The benchmark KOSPI index plummeted 5.28% to around 5,383. The Korea Exchange was compelled to implement a five-minute trading halt on program sell orders after the KOSPI 200 futures saw losses exceeding 5%. The KOSPI has now declined nearly 24% over the past month, with semiconductor giants leading the recent sell-off. SK Hynix saw its shares drop 9.46%, while Samsung Electronics fell 7.57%.

The pressure extended to global semiconductor markets, with the Philadelphia Semiconductor Index falling 3.1% to a six-month low, further impacting Asian chip manufacturers.

Taiwan’s stock market lost an estimated $182 billion, with its benchmark TAIEX index falling 3.28% to 42,314, its lowest point in three months. Major technology firms spearheaded the decline, including MediaTek, which dropped 6.86%; Delta Electronics, down 7.38%; and ASE Technology, which lost 9%. Taiwan Semiconductor Manufacturing Company (TSMC) also experienced a 2.5% decrease as investors reduced their exposure to semiconductor stocks.

Japan’s market saw a further $160 billion in value disappear, with the Nikkei 225 index declining 3% to approximately 61,077. SoftBank Group’s shares fell 7%, while Tokyo Electron, Kioxia Holdings, and Advantest experienced more significant drops of 9.42%, 13.14%, and 14.71%, respectively. In contrast, some non-technology stocks showed resilience, with Fast Retailing gaining 4.72%, and Toyota Motor and Mitsubishi UFJ also recording positive movements.

The primary concern among investors is the possibility that Democrats, now controlling both chambers of Congress, will pursue stricter regulations for AI companies and data centers. Such measures could potentially delay data center projects, increase power infrastructure costs, and ultimately slow down AI-related investments. These concerns have heightened fears of reduced demand for semiconductors, placing significant pressure on Asian markets heavily reliant on semiconductor exports and U.S. tech sector spending.

Contrasting Performance in Other Markets

In a notable divergence, Chinese technology stocks moved higher. Moore Threads gained 3.29%, and Shanghai Biren Technology rose 2.5%. The Hang Seng Tech Index also surged 4.5%, driven by strong performances from Alibaba and Meituan. Their comparatively lower dependence on U.S. AI infrastructure spending appeared to bolster their positions during the broader market downturn.

While AI-focused stocks faced a sharp sell-off, traditional safe-haven assets saw gains. Gold and silver recovered, rising 1.7% and 1%, respectively. Meanwhile, Brent crude oil experienced a significant decline, falling 8.7% to $94.68 per barrel.

The leading cryptocurrency, Bitcoin, also demonstrated strength, climbing more than 4% to trade around $81,000.