Wall Street's AI sell-off after Democratic midterm win sends Asian markets sharply lower

Wall Street sell-off after the midterms

US stocks closed sharply lower on Thursday, 5 November, after the Democrats won the midterm elections and took control of Congress. The Dow Jones Industrial Average fell 3.44%, the S&P 500 lost 4.35% and the Nasdaq dropped 5.52%. Reports put the value wiped out in that single session at 3,200 billion dollars. Chipmakers Broadcom and Nvidia each lost more than 9%, while Oracle fell 7%. Tesla dropped 10.77% and SpaceX fell 9.5%, both companies linked to Elon Musk. The Nasdaq also stood about 15% below its 6 October peak, a loss of roughly 2,500 billion dollars in total market value according to one report.

Dow Jones-3.44%

S&P 500-4.35%

Nasdaq-5.52%

Dow Jones

-3.44 %

S&P 500

-4.35 %

Nasdaq

-5.52 %

Data from the article text

Why investors fled AI stocks

The sell-off centers on fears that a Democratic-led Congress will tighten rules on artificial intelligence and slow the buildout of data centers. Bloomberg, citing data from the analysis firm Cleanview, reported that about 40% of the US data center capacity under construction is due to be built in states whose newly elected governors have promised to block or suspend such projects. Market analyst Hebe Chen told Bloomberg that Asian markets, heavily weighted toward semiconductors, could face some of the strongest headwinds yet because of their exposure to global AI supply chains. Bonds moved the other way, with the 10-year Treasury yield falling to 4.82% and the 30-year to 5.24%. Investors also began to expect fewer central bank rate increases ahead, and the bond rally reflected worries that slower AI investment could weigh on economic growth.

Asian markets fall further

Trading in Asia on Friday, 6 November, opened sharply lower. Japan's Nikkei 225 closed down 5.96% at 57,434.77, a loss of 3,643 points that pushed the index below 60,000 for the first time since May. Kioxia, SoftBank Group and Advantest led the declines. In Seoul, the Kospi fell more than 8% early in the session, triggering a 20-minute trading halt, and closed down 6.02%, its lowest level since late March. Samsung fell 6.35% and SK Hynix dropped 10.44%. In Taipei, the Taiex closed down 4.5% after recovering part of an opening slump, and TSMC fell as much as 8.5% before closing down 4.7%. Shanghai eased 1.10% and Hong Kong fell 1.27%.

Nikkei 225-5.96%

Kospi-6.02%

Taiex-4.5%

Shanghai-1.1%

Hong Kong-1.27%

Nikkei 225

-5.96 %

Kospi

-6.02 %

Taiex

-4.5 %

Shanghai

-1.1 %

Hong Kong

-1.27 %

Data from the article text

European markets open lower

European markets opened lower and stayed under pressure through the session. By mid-session Frankfurt was down 2.2% and London about 2%, while Paris fell 1.6% and Amsterdam 1.2%. Milan held losses near one percentage point after its FTSE MIB index opened down 1.68%. Among Italian blue chips, Nexi fell 3.8%, Generali dropped 3% and Banco BPM lost 2.7%. Gas fell 3% to 88 euros per megawatt hour, and the Italian-German 10-year spread sat around 109 basis points. Oil traded near 90 dollars per barrel after an early sell-off on hopes that the midterm result could help ease Middle East tensions. Saudi Arabia issued alerts of potential danger at Yanbu, the Red Sea oil export hub, and the euro traded at 1.117 against the dollar.

What comes next

Investors were also looking ahead to the next decisions of the European Central Bank. Friday's session brought the latest US employment figures and the University of Michigan consumer sentiment index. The dollar had strengthened against the main currencies, with the dollar-yen rate at 158.04 in early trading. Wall Street futures remained uncertain while Asian and European futures pointed lower.