Democratic Sweep Sparks Regulatory Fears
The US held midterm elections on the 3rd, with the Democratic Party winning majorities in both the House and Senate as well as gubernatorial races including Texas. As Democrats advocate stronger regulation of data centers, markets fear that data-center construction plans essential to the AI industry could be delayed or even halted, triggering this round of plunging global AI-related stocks. The multi-year rally in AI concept stocks was built largely on rapid expansion of the artificial intelligence market and expectations that companies would keep raising data-center and semiconductor investment; the political shift has now shaken the outlook for that investment expansion.
US and Asian Markets Tumble in Tandem
US stocks plunged across the board on the 5th, with the tech-heavy Nasdaq Composite falling 5.5%, led lower by AI and semiconductor shares. The Philadelphia Semiconductor Index, made up of major chipmakers including Nvidia and Micron Technology, plummeted 12.2%. According to QUICK FactSet, as of the 5th, total global stock market capitalization fell to 154 trillion US dollars, down 3.5 trillion US dollars from the previous day, or about 550 trillion yen and NT$115 trillion.
Japanese stocks also faced heavy selling pressure, with the Nikkei average closing down 3,643 points, nearly 6%, at 57,434, breaking below the 60,000 mark to a 7-month low. The single-day point decline was the third largest on record, behind only the August 2024 crash and Black Monday in 1987. The Tokyo Stock Exchange Prime Market lost 77 trillion yen in market value, showing selling in AI concept stocks spreading from the US to Asian markets, with Taiwanese and South Korean equities also hit hard.
AI Supply Chain Outlook Reassessed
Takahiro Ishibashi, vice president at Goldman Sachs Securities, said that unlike past selloffs, the market sees no bullish catalyst that could trigger a quick rebound, with a mood bordering on resignation spreading among investors. Tomoo Kinoshita, global market strategist at Invesco Asset Management, noted that once data-center investment is constrained, the entire AI supply chain including semiconductors will take a direct hit. As AI-related stocks had kept rising amid a near-euphoric atmosphere, once investors turn to selling, declines can quickly accelerate.
Since OpenAI launched ChatGPT in November 2022, total global stock market capitalization has expanded to 1.6 times its level at the time, with investment flowing into AI-related companies on the assumption that AI demand will keep growing. With US data-center construction potentially facing stricter regulation, markets are reassessing the future scale of investment and pace of growth in the AI industry. The selloff also highlights how the AI investment boom, heavily dependent on continued infrastructure expansion, is vulnerable to policy shifts.