Tech stock rout driven by US AI fears spreads to Asian markets

A sharp sell-off in technology shares that began on Thursday in the United States carried over into Asian trading on Friday. Investors fear that the Democratic Party's victory in the US midterm congressional elections will mean closer scrutiny of artificial intelligence (AI) and a slower build-out of data centres in the country. The worry has rattled global markets tied to the AI boom.

Losses across Asian exchanges

Japan's Nikkei index fell 6 percent on Friday, its largest one-day drop since April 2025. Indices in South Korea and Taiwan dropped more than 8 percent after the opening bell before trimming losses. Trading on South Korea's Kospi market was temporarily halted.

Taiwan's market closed down 4.5 percent, and for the week the index fell 12.2 percent, its biggest weekly decline since 1991, according to LSEG data. South Korea's Samsung Electronics and SK Hynix fell nearly 6 percent and 9.4 percent respectively. Taiwanese chipmaker TSMC dropped as much as 8.5 percent before closing 4.7 percent lower. In Japan, Kioxia and investment firm SoftBank Group each slid 11 percent.

Overnight on Wall Street, the tech-heavy Nasdaq sank 5.5 percent, and S&P 500 companies lost $3 trillion in value.

Official responses

South Korea's Finance Minister Lee Hyoung-il eased rules on retail investors' leveraged investments. In China, state entities bought equities to stabilise the market, according to Al Jazeera's correspondent. Taiwan's economy ministry said demand for AI, high-performance computing and cloud services is expected to keep growing.

Analyst views

Analysts say the political concerns are hitting an AI trade that was already unsteady because of doubts over returns on massive infrastructure spending. Toby Walsh, chief scientist at the AI Institute at Australia's University of New South Wales, expects new data centre regulations in many countries, including the US, Australia and the United Kingdom. He said developers had built without gaining social licence, and that the sell-off may let the bubble deflate in a manageable way.