South Korea’s Kospi, which has swung between waves of buying and selling amid the artificial intelligence (AI) frenzy, crashed on Thursday, November 5, tumbling 5.3% to settle at 5,383.80.
The sharp selling triggered a temporary suspension of program trading on the main exchange, while the tech-heavy Kosdaq also activated a sell-side sidecar around noon as the index dropped below the 700 mark.
The sell-off in key heavyweights, including Samsung Electronics and memory chipmaker SK Hynix, dragged the Kospi to its biggest single-day decline in three weeks, even as Wall Street closed sharply higher.
Semiconductor equipment and components manufacturers also came under pressure, with Hanmi Semiconductor and Samsung Electro-Mechanics recording significant declines. The weakness followed a drop of more than 3% in the Philadelphia Semiconductor Index overnight, even as the broader US stock market ended higher.
Investors are concerned that Democratic victories in the US midterm elections could lead to tighter restrictions on artificial intelligence infrastructure and data centre development.
The sell-off was not limited to South Korea. Other Asian markets with significant exposure to the AI industry, including Taiwan’s Taiex and Japan’s Nikkei 225, also closed lower, declining 1.8% and 2%, respectively.
OpenAI investor SoftBank Group shed 6.9%, while Tokyo Electron, a manufacturer of semiconductor production equipment, skidded 9.5%. Semiconductor testing equipment maker Advantest tumbled 15%.
AI spending and regulatory concerns weigh on Asian tech stocks
A Democratic-led Congress could pressure US President Donald Trump to scale back the Iran war, weighing on shares of companies that manufacture weapons and other equipment for the US military. The possibility of pressure to pull back from the conflict also sent Brent crude oil, the international benchmark, plunging 8.7% to $94.62 a barrel.
Democrats have voiced opposition to data centre expansion, including in Texas. Their electoral gains could accelerate a backlash against the power-hungry, water-intensive, and noisy facilities that are central to the AI boom but have become increasingly unpopular with local communities.
US technology giants have been expanding their infrastructure at a blistering pace, with plans to spend more than $740 billion this year, up from roughly $400 billion last year, according to Bloomberg.
The artificial intelligence industry has remained volatile for months amid criticism that valuations have risen too far and that the sector could be in a bubble. Concerns are growing that the hundreds of billions of dollars Big Tech companies are pouring into AI data centres may not generate enough productivity gains and profits to justify the investments.
Defence stocks struggle amid concerns over military spending
Defence companies also faced heavy selling as investors anticipated that Democratic lawmakers could seek to restrain military spending and increase pressure on the administration to reduce its involvement in the Iran conflict, according to news agency Invezz.
Among individual stocks, LIG Defense & Aerospace fell 16%, Hanwha Systems declined 11.45%, while Hanwha Aerospace lost more than 8%.
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