Asian chip stocks follow the Nasdaq down as investors bet Democratic gains will slow data-center building

The sell-off in artificial intelligence (AI) stocks that began in New York spread across Asia on Friday. Japan's Nikkei 225 fell 3,643.13 points, or 5.96%, to 57,434.77. The close left it more than 20% below its June peak, which meets the standard definition of a bear market. South Korea's Kospi fell more than 8% and triggered a circuit breaker. In Tokyo, SoftBank fell 11.6% and Kioxia 13%, and Taiwan Semiconductor Manufacturing Company (TSMC) dropped 9.6%. Al Jazeera attributed the losses to concern over US data-center expansion and AI regulation.

The losses in Asia followed Thursday's session in New York, when the Nasdaq Composite fell about 5.5% into correction territory and lost roughly $2.5 trillion in market value. NPR put the loss closer to $2 trillion. According to CNBC figures cited by Quartz, the iShares Semiconductor exchange-traded fund (ETF) fell as much as 11%, its steepest one-day drop since March 2020. Broadcom, Nvidia and Oracle each lost about 6%. MercoPress reported that the largest technology companies alone lost about a trillion dollars in a day.

Most coverage points to the same trigger. Democrats won the House, the Senate and several governorships on Tuesday. Texas Governor-elect Gina Hinojosa campaigned on a temporary moratorium on data centers and on ending some tax incentives for building them. The Economist wrote that investors fear Democratic control will slow the AI boom. Voter anger over electricity bills turned data centers into a campaign issue. In Ohio, Democrat Sherrod Brown ran ads calling his opponent a spokesman for data centers.

The election explains the timing of the sell-off better than it explains its size. The selling began before the vote. Chinese financial outlet Gelonghui reported before polling day that CoreWeave shares had fallen 25.21% in a week. Data-center builders and power-equipment makers dropped 20% or more on Wednesday. President Donald Trump still holds a veto over federal legislation and still calls the industry essential to competing with China. The decisions that set the pace of construction, such as permits, grid connections and power tariffs, are made mostly by states and utility regulators. The vote raised the political cost of a capital-spending plan that was already priced for uninterrupted growth and was increasingly funded with debt.

Bonds rallied. The 10-year Treasury yield fell to 4.83%, and the two-year yield fell to 4.52%. The market-implied probability of a Federal Reserve rate increase in December fell from 82% to 66%. Some money moved toward domestic shares in other markets. In Tel Aviv, Globes reported (in Hebrew) that the TA-35 and TA-90 indexes rose about 2% at the open, led by companies most exposed to Israel's domestic economy. The US October employment report is due at 13:30 UTC.