The immediate catalyst was a transmission of volatility from the U.S. markets, where Thursday witnessed the steepest single-day decline in more than a year. The S&P 500 tumbled 4.4%, while the Nasdaq Composite slumped 5.5% and the Dow Jones Industrial Average lost 3.4%. The Philadelphia Semiconductor Index, a key gauge for the tech sector, plunged 12.3%. By Friday morning, Asian investors were reacting to these losses, dumping tech shares amid growing concerns about the sustainability of artificial intelligence (AI) investment.
In South Korea, the pressure on the market was heavily concentrated in the semiconductor sector. Samsung Electronics shares fell 4.1%, while SK Hynix slid 7%. These declines were consistent with the broader global sentiment that valued high-growth tech stocks, particularly those tied to AI infrastructure, are facing a reassessment of their worth. The U.S. midterm election results added another layer of complexity to this financial anxiety. Democrats’ gains in the midterms have raised concerns that a Democrat-controlled Congress could increase scrutiny of data-center developments and potentially slow construction, particularly in states where candidates campaigned against large-scale projects.
Japan’s markets experienced a similarly severe downturn. The Nikkei 225 fell as much as 7.1% during the session, last trading around 5.5% lower. This decline pushed the benchmark more than 20% below its June record high, officially bringing the index into bear-market territory. Japan’s broader TOPIX index also fell nearly 6%. The selloff was led by major technology firms, including semiconductor equipment maker Advantest, memory-chip producer Kioxia Holdings, and SoftBank Group. These stocks extended a rout that had already begun on Thursday, when Advantest plunged 15%, Lasertec dropped 14%, and Kioxia fell 13%.
The concerns driving the sell-off extend beyond domestic election politics to the fundamental economics of AI deployment. Investors are increasingly questioning elevated valuations and the actual returns on massive AI infrastructure investments. This sentiment was reinforced by earnings results from U.S. companies. Qualcomm shares sank nearly 10% overnight after its smartphone chip sales missed analyst estimates. This miss added to the pressure on semiconductor companies globally, suggesting that the revenue growth promised by the AI boom may not be materializing at the pace expected by bullish investors.
The contagion spread to other major Asian markets, though with varying degrees of intensity. In Taiwan, the technology-heavy Taiwan Weighted index fell 4.1%, with Taiwan Semiconductor Manufacturing Co (TSMC) shares also falling more than 4%. China’s markets showed more resilience, with the Shanghai Composite falling 1%, the CSI 300 slipping 1.3%, and Hong Kong’s Hang Seng index edging 0.3% lower. Singapore’s Straits Times Index dropped 2.4%, while Australia’s S&P/ASX 200 fell 1%. Futures tied to India’s Nifty 50 inched down 0.3%.
While the stock market reacted with panic to the tech sector’s struggles, other asset classes moved on different drivers. Oil prices extended gains in Asian trading after sharp losses earlier in the week. Investors remain weighing uncertainty about President Donald Trump’s next move regarding Iran after the midterms. While expectations that Democrats’ election victory could accelerate efforts to end the Iran war had initially supported risk appetite, concerns over AI investment and semiconductor earnings have since taken centre stage in the equity markets.
As of 02:33 GMT, U.S. stock futures were trading higher, suggesting a potential stabilizing factor for the following day’s open. However, for South Korean and Japanese investors, the immediate focus remains on whether the current valuation reset in the AI sector is a temporary correction or the beginning of a longer-term adjustment. The circuit breaker that halted trading in Seoul serves as a stark reminder of the fragility of markets heavily leveraged on a single technological narrative. As the week ends, the key question for businesses and consumers in the region is whether the slowdown in data-center construction and the scrutiny of chip earnings will lead to broader economic adjustments or if the technology sector can sustain its growth trajectory despite the political and financial headwinds.
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