Democratic sweep in US midterm elections sparks worries about tighter AI regulation, triggering a violent selloff in technology stocks that rapidly spread across Asia-Pacific markets.
In early Friday trading, the MSCI Asia-Pacific Index fell 3% to 247.75 points. South Korea's KOSPI plunged 8.8%, breaking below the symbolically significant 5,000-point level and triggering a circuit breaker. Japan's Nikkei 225 dropped more than 5%, falling below 60,000 intraday and retreating more than 20% from its June high, officially entering a technical bear market.
This wave of selling stemmed from Wall Street's "AI crash" overnight. The Nasdaq 100 plummeted 6.4% on Thursday, wiping out $2.3 trillion in market value in a single day—the worst one-day performance since March 2020. The S&P 500 dropped 4.4%, its largest single-day decline since the April 2025 tariff shock.
Democrats swept both chambers of Congress and won governorships in key states including Texas, sharply intensifying market concerns about slower data center construction. The Philadelphia Semiconductor Index has fallen about 16% this week, its worst weekly performance since April 2024.
On the macroeconomic front, markets are now awaiting Friday's October nonfarm payrolls report, with the Dow Jones consensus forecast of 59,000 new jobs and the unemployment rate holding steady at 4.2%. Previously released US weekly initial jobless claims fell to 189,000, below all economists' forecasts.
Chip Giants Hit First, Over $1 Trillion in Market Value Erased
Asian chip stocks extended overnight US losses at Friday's open. Within the tech sector, AI supply chain companies suffered the most brutal impact.
South Korea's KOSPI plunged 8.55%, with decliners on the loss leaderboard generally falling between 12% and 17%. The KOSPI's fall below 5,000 points carries special market significance. South Korean President Lee Jae-myung had set 5,000 as a recovery target when the index was around 2,500, and subsequently breaking above that level was once seen as a milestone for the Korean market.
Now rapidly falling below it not only undermines this symbolic meaning but also raises questions about whether the previous rally can be sustained—the KOSPI has now erased all gains recorded after the end of the Iran war.
Power equipment leaders that had surged on AI data center construction tailwinds—Hyosung Heavy Industries (-16.86%) and SANIL ELECTRIC (-13.02%)—faced concentrated selling pressure and valuation selloffs.
SK Square, a major shareholder of SK Hynix, plunged 13.47%. Semiconductor equipment maker MIRAE tumbled 17.04%, leading the decline. Electronic components and packaging leader Samsung Electro-Mechanics fell 14.30%, and Samhwa Electric also dropped 12.75%.
As risk appetite collapsed across the board, brokerage and investment firms' proprietary trading businesses and commission expectations deteriorated, sending securities holding giant Korea Investment Holdings down 13.87%.
South Korea's Samsung Electronics and SK Hynix both fell more than 10%.
Japanese AI Computing and Semiconductor Supply Chain Also Hammered
Japan's AI computing power and semiconductor full supply chain also suffered heavy selling. The TOPIX fell 5.1%, and the Nikkei 225 dropped nearly 5.8%.
Japan's core semiconductor equipment and technology investment giants led the decline. Testing equipment monopolist Advantest plunged 15.38%, leading the market lower. Thin-film deposition equipment maker Kokusai Electric plummeted 14.89%. Japan's semiconductor equipment leader Tokyo Electron dropped 12.56%. Technology investment bellwether SoftBank Group, pressured by global tech stock risk aversion, plunged 14.25% in a single day.
Upstream materials and chip manufacturing were not spared. Semiconductor materials and components saw concentrated liquidation. Sputtering target giant JX Metals dropped 14.52%. Electronic materials maker Mitsui Mining & Smelting fell 13.91%. Silicon wafer giant SUMCO plunged 13.63%. Graphite materials maker Tokai Carbon and ABF insulating film giant Ajinomoto fell 12.42% and 11.66% respectively. Additionally, automotive chip giant Renesas Electronics also dropped sharply by 11.45%.
US Stock Futures Stabilize, Nonfarm Payrolls Become Next Focus
Notably, as Korean and Japanese markets opened sharply lower, US stock futures staged a modest rebound. Nasdaq futures briefly turned positive, and S&P 500 E-mini futures also narrowed losses, suggesting some investors are beginning to buy the dip.
G Squared Private Wealth Chief Investment Officer Victoria Greene said in a CNBC interview that the decline has created a buying opportunity. She said:
"The AI trade, in my view, is not over. Now it's a pretty good discount."
She expressed interest in memory stocks, citing capacity shortages widely mentioned by management across companies this earnings season, and added:
"In non-recession periods, buying stocks that have fallen sharply is usually the right choice."
Another focus for investors is Friday's US October nonfarm payrolls report. The Dow Jones survey consensus expects 59,000 new jobs, with the unemployment rate holding steady at 4.2%.
Meanwhile, Cleveland Fed President Beth Hammack stated that interest rates need to remain at restrictive levels to bring inflation back to target, and more frequent adjustments would help reduce the risk of policy falling behind the curve.
Bloomberg strategist Mark Cranfield noted that in the current market environment, one can expect early reassuring voices from government and exchange officials attempting to characterize the decline as a normal market pullback. "The key is whether these messages can be accepted by the market."
Safe-Haven Assets Strengthen, Crude Oil Extends Rebound
During Friday's Asia-Pacific session, gold received clear support in early Asian trading, with spot gold briefly returning above $4,100 per ounce, up nearly 6% for the week.
The 10-year US Treasury yield edged up 0.9 basis points, holding near 4.83%.
The Japanese yen strengthened slightly to 157.65.
Oil prices also firmed, with WTI crude rising 0.62% to $91 per barrel in early Friday trading, after rebounding nearly 3% on Thursday.