Tech stocks plunge across Asia as US midterm result stokes fears of tighter AI rules

A rout in technology shares that began in the United States continued in Asian trading on Friday. Analysts said investors are dumping tech stocks amid fears that the Democrats' victory in the US midterm elections will bring tighter scrutiny of artificial intelligence and slow the country's data centre build-out.

The sell-off was so severe that market authorities in South Korea paused trading on Friday. Trading on the Kospi market was temporarily halted after prices plunged, as officials scrambled to stem the selling.

Japan's Nikkei index slumped 6 percent, its deepest one-day drop since April 2025. Indices in South Korea and Taiwan plunged more than 8 percent after the opening bell, before cutting some of their losses later in the session.

Wall Street had set the tone overnight. On Thursday night, Wall Street's volatility 'fear gauge' soared and the tech-focused Nasdaq sank 5.5 percent, wiping $3 trillion off S&P 500 firms, as investors fretted that the Democrats could put the brakes on the AI boom being encouraged by President Donald Trump.

Reporting from Beijing, Al Jazeera's Katrina Yu said: 'It was a brutal morning for many investors here in Asia. We saw that the AI sell-off continues here across many countries.' She said some major markets had recovered part of their losses, but all of them were still clearly in the red.

Analysts say the political jitters are hitting an AI trade that was already on shaky footing because of worries about returns on massive spending on related infrastructure. Dong Baozhen, chairman of asset manager Lingtong Shengtai, told Reuters: 'The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone.'

Dong added: 'The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped. Can AI bull markets elsewhere hold up on their own?'

In South Korea, Finance Minister Lee Hyoung-il eased rules on retail investors' leveraged investments in a bid to calm the market. In China, state entities stepped in to buy up equities to stabilise the market, Al Jazeera's Yu reported.

Taiwan's stock market closed down 4.5 percent, recovering somewhat from its early morning slump. For the week, however, the index clocked a 12.2 percent decline, its biggest since 1991, according to LSEG data. The government of the island, a key producer of chips, sought to talk up the sector's prospects in a statement on Friday.

The losses were steep at company level too. Korean AI chipmakers Samsung Electronics and SK Hynix fell nearly 6 percent and 9.4 percent respectively, cutting steep losses from earlier in the day. TSMC fell as much as 8.5 percent in Taiwan before closing down 4.7 percent. In Japan, Kioxia plunged 11 percent while AI investor SoftBank Group slid 11 percent.

Analysts say the selling indicates investors are starting to factor in increased opposition to data centres, whose construction has imposed costs on local communities. Toby Walsh, chief scientist at the AI Institute of the University of New South Wales in Australia, told Al Jazeera he expected new regulations on data centres in many countries, including the US, Australia and the United Kingdom.

Walsh said: 'The developers were building them in a way that wasn't actually getting social licence. They were building them in places where they didn't need to build. You don't have to build data centres in urban areas. You can build them in the middle of nowhere.' He added: 'I think it's actually for the good of the tech industry in the United States that this has happened. We're spending money a bit too quickly. And maybe this is the way to let that bubble deflate in a manageable way.'

Taiwan's economy ministry said in its Friday statement that demand for emerging technologies such as AI, high-performance computing and cloud services is expected to keep expanding, driving demand for tech companies. Asian markets cut some of their losses by the close as authorities worked to stem the panic, but investor anxiety remained.