Asia’s tech-heavy markets crumbled on Friday as fear of increased regulatory scrutiny and a slowdown in AI build-out unleashed the steepest decline in US stocks since the tariff-triggered “Liberation Day” rout in April 2025.
South Korea’s KOSPI fell more than 8 per cent to trigger a circuit breaker and was last down 7 per cent after trading resumed. Japan’s Nikkei slumped 6 per cent while Taiwan markets was last down more than 8 per cent.
Wall Street’s volatility “fear gauge” soared, the Nasdaq sank 5.5 per cent and $3 trillion was wiped off S&P 500 companies, with investors worried Democrats, who dominated the midterm elections this week, will apply the brakes to the AI boom.
The political jitters are hitting an AI trade already on shaky footing due to worries about the return on investment for the enormous sums of money being poured into the technology.
“There is also clearly an element of panic in the selling, and positioning is making the adjustment much more violent,” said Charu Chanana, chief investment strategist at Saxo.
“When investors begin unwinding these positions simultaneously, the selling can become self-reinforcing, particularly if leverage and forced liquidations are involved.”
Market participants see Asia’s chipmakers and data centre equipment suppliers in South Korea, Taiwan and Japan as especially vulnerable and they had already tumbled on Wednesday and Thursday.
AI chipmakers Samsung Electronics fell nearly 10 per cent while SK Hynix slid 11.7 per cent. Kioxia plunged 14 per cent while TSMC was down 8.5 per cent.
AI investor SoftBank Group slid 11 per cent, while the cost of insuring against a default for SoftBank jumped to its highest point in four years on Friday.
European stock futures fell 1 per cent, indicating that the selloff as likely to spread across to Europe.
Real-time sentiment shift
Investor fear also centred on whether a stalling AI infrastructure expansion could hurt smaller firms whose capacity to raise funds has already been limited by higher interest rates and tighter financial conditions.
Neocloud company CoreWeave, which has become a barometer of investor anxiety over heavy AI spending and borrowing, slumped 10 per cent. Its 5-year credit default swap spreads, which measure market expectations of a potential default, widened to a record level.
“It’s pretty clear there’s been a real shift in sentiment,” said Michael McCarthy, chief executive for Australia and New Zealand at online brokerage Moomoo.
“Market turning points are often accompanied by strong disagreement, and that shows up in the market by huge swings in either direction,” he said. “That’s what we appear to have had – and last night’s emphatic sell-down suggests that is the direction that we’re now headed in.”
The selling indicates investors are starting to factor in increased local opposition to building data centres, with analysts saying markets have yet to fully consider the cost such building has imposed on communities.
The Philadelphia Semiconductor Index slumped 12.2 per cent overnight and the Nasdaq, which reversed an initial swing higher after the midterms before dropping, has now shed 12 per cent from its record high close a month ago.
Bonds were poised to gain in Asia, while the US dollar slipped against haven currencies such as the yen and Swiss franc. [FRX/]
“Treasuries can probably rally a lot further,” said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore. “And I suspect it will be an ugly day for semiconductor and memory (stocks).”
The yield on the benchmark US 10-year Treasury note was at 4.838 per cent, hovering near the lowest level since September 9. [US/]
