HONG KONG — Following the U.S. midterm elections, a significant downturn in tech stocks has reverberated across global markets, with a striking selloff that began on Wall Street and spread to Asia and Europe. This wave of financial turbulence was largely ignited by the victory of candidates opposed to artificial intelligence (AI) development, raising alarms about the future of the tech sector.
The impact was immediate and severe, particularly in Asia, where Japan’s Nikkei index marked its steepest decline since 2020. The Nasdaq 100 in the U.S. alone saw a staggering $2.3 billion wiped off its market value, plummeting by 6.3% in a single day. The S&P 500 followed suit, losing $2.8 trillion in value as it dropped 4.4%, marking one of the worst trading days in recent history.
Market futures in the U.S. showed mixed signs early Friday, with European shares also opening lower amid ongoing concerns. South Korea’s Kospi index fell by over 8%, prompting a temporary halt in trading, while Japan’s Nikkei entered bear market territory with a 6% drop.
In Taiwan, a hub for AI companies including TSMC, the benchmark TAIEX index experienced a 9% decline. The FTSE 100 in London dropped by 1.6%, and similar losses were recorded in France and Germany, further highlighting the market’s vulnerability to the shifting political landscape.
Charu Chanana, Chief Investment Strategist at SAXO Markets, indicated that the market’s reaction is a direct reflection of its reliance on the U.S. AI infrastructure cycle. Tay Hui, J.P. Morgan’s APAC Chief Market Strategist, echoed this sentiment, noting the close ties between Asian companies and the global AI capital expenditure cycle.
The recent election results are set to usher in a group of politicians against AI and data center expansion, including the newly elected governor of Texas, Gina Hinojosa. This political shift raises questions about future regulations that could impact AI infrastructure projects, potentially leading to delays and increased costs.
Asian investors, who witnessed significant gains during the AI boom earlier this year, are now facing a challenging and volatile market environment, underscoring the precarious nature of tech investments in the current geopolitical climate.
Photo credit: Andrew Caballero-Reynolds
