Asian markets decline as tech sell-off continues amid US AI fears

A significant decline in technology stocks, which originated in the United States overnight, has continued to affect trading across Asia. Market regulators in South Korea were forced to suspend trading on Friday as share prices experienced a sharp downturn throughout the region. Global financial markets have been unsettled by this drop, which is largely attributed to concerns that a victory for the Democrats in the US midterm elections will lead to greater regulatory oversight of AI and potentially slow the expansion of data centre infrastructure.

Japan’s Nikkei index slumped 6 percent, marking its deepest one-day drop since April 2025. Indices in South Korea and Taiwan experienced plunges of more than 8 percent shortly after the market opened, though they managed to reduce some losses as authorities intervened to curb the selling pressure. Wall Street’s volatility “fear gauge” saw a sharp rise overnight on Thursday, while the tech-focused Nasdaq sank 5.5 percent, effectively wiping $3 trillion off the value of S&P 500 firms as investors worried that the Democrats might hinder the AI boom previously encouraged by President Donald Trump.

“It was a brutal morning for many investors here in Asia. We saw that the AI sell-off continues here across many countries,” noted Katrina Yu, reporting from Beijing. She added, “Some of those major markets have fortunately recovered some of those losses, but all of them are still clearly in the red.” Analysts suggest that political uncertainty is destabilising an AI trade that was already under pressure due to concerns regarding returns on significant infrastructure expenditure.

“The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone,” stated Dong Baozhen, chairman of asset manager Lingtong Shengtai. “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?” By the time Asian markets reached their close, losses had been trimmed as authorities worked to stabilise the situation.

Trading on South Korea’s Kospi market was temporarily suspended during the slide, and Finance Minister Lee Hyoung-il moved to ease regulations on leveraged investments for retail traders. In China, state-backed entities intervened to purchase equities to support the market, according to reporting by Katrina Yu. The Taiwan stock market concluded the day down 4.5 percent, having recovered partially from its morning decline. LSEG data indicated that the index fell 12.2 percent for the week, representing its most significant decline since 1991.

The government of Taiwan, a primary producer of semiconductors, attempted to reassure investors regarding the sector's future. The economy ministry stated on Friday that demand for emerging technologies, including AI, high-performance computing, and cloud services, is expected to continue growing, which should drive demand for tech firms. Among Korean chipmakers, Samsung Electronics dropped nearly 6 percent, while SK Hynix fell 9.4 percent, both recovering from steeper earlier losses. TSMC in Taiwan fell as much as 8.5 percent before finishing the session down 4.7 percent.

In Japan, Kioxia plunged 11 percent, and the AI investor SoftBank Group slid 11 percent. This selling activity suggests that investors are beginning to account for growing opposition toward data centres. Analysts have noted that markets have not yet fully considered the impact such construction projects have had on local communities. Toby Walsh, the chief scientist for the AI Institute at Australia’s University of New South Wales, anticipates that new regulations regarding data centres will be introduced in many nations, including the United States, Australia, and the United Kingdom.

“The developers were building them in a way that wasn’t actually getting social licence,” Walsh stated. “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. 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.”