Tech stocks plunged after the Us midterms – here’s why | Bbc News

Tech-heavy indices have fallen sharply through the course of the day. In South Korea and Japan, firms that make the computer chips and other equipment that powers AI saw their values slide. Taiwan stocks actually clocked their biggest weekly decline since 2001. That, of course, the year of the dot-com crash, falling 12.2%. Here's Jake Kwan in Seoul. It has been a brutal day for investors here in East Asia. Japan, South Korea, and Taiwan, all the major markets, have closed with a sharp sell-off today. And in South Korea, the market was particularly hard hit. They had to suspend all trade for 20 minutes when the market opened with a drop of more than 8 percentage points. Now, Samsung Electronics and SK Hynix, the two chip giants in South Korea, had lost more than around 10% of its stock value at one point as investors feared that the US midterms election result will lead to Democrats introducing more harsher regulations around AI data centers. Now these AI data centers has been the big buyers of the memory chips from here in East Asia and these East Asian chip giants have really ballooned in their market value and profits off the back of the AI boom. The question here is, among the analysts, is that is this the end of the AI race? And few analysts here actually believe that. Even though the Democrats have been promising more regulations, we need to wait to see what those regulations will actually entail. They believe that there is a lot of fear in the market, a lot of panic in the market. But the fundamentals of these companies is going to prove strong for the years to come. Now, Wall Street was shaken on Thursday by widespread sell-off led by those tech shares in what was chaotic trading that saw retail investors as well as institutions dumping stocks. The Dow Jones Industrial Average dropped 1,800 points, or over 3.4%, raising all of its gains from the previous day. The S&P 500 now, well, that fell more than 4.3%. It's worst performance since President Trump's Liberation Day in April 2025. So that's a decline in value of around, watch, $3 trillion in America's biggest listed companies. And for context, that's approaching the entire value of the UK's FTSE 100. But it was the tech-heavy Nasdaq that was hardest hit, falling over 5.5%. After the Democrats sweeping midterm election victory, investors scared, fearing a crackdown on data centres, the target of a vote of backlash over water and energy use, and also tougher regulation of AI. With more on all of this, here's the BBC's North America Business Correspondent, Michelle Fleury. The losses helped drag the Nasdaq down 5.5%. The tech-heavy index is now in what market watchers call correction territory. That's when it falls at least 10% below its recent high. The fear that's driving this selling is that the boom in AI data centre construction will slow after the Democrats' mid-term election victory. Investment bank UBS warns that almost a third of planned data centre capacity could be at risk. This sell-off comes on top of broader concerns about whether the huge amounts being spent on artificial intelligence will ever pay off. And it's not just tech stocks that are feeling the pain. The broader S&P 500 was down more than 4%, a sign that the sell-off was spreading well beyond the AI trade. As for the Dow Jones Industrial Average, it gave back all of those monster gains that it made one day earlier. Remember, AI has been a major driver of economic growth. Michelle Flurry there. Well, President Trump has acknowledged the scale of those losses, writing on Truth Social, saying the stock market suffered one of the worst days in history. And he went on to argue it wasn't Republicans, but the Democrats. As he called his political opponents, pledging that America would soon be bigger and stronger than ever before. Well, Ray Wong is a veteran tech investor based in Silicon Valley. Earlier, I asked him to clarify whether Democrats had specifically pledged to stop the advance of those new data centers. Let's take the Democrats and the Republican issue out of the question. What the American people voted on was the fact that they're scared of AI. They're scared that data centers are going to do something that they're not sure about. And they do not understand the strategic importance of how it fits in terms of the global race for competition on AI. And those three things converged post-election because if you look at the electorate, a lot of voters that voted for one party actually switched over because they were scared on these three big issues. And that's really what drove this. And investors, thinking that traditionally post-election there was a bump, investors started to realize that if these data centers were going to be held up, the foundation of America's AI economy is based on the fact that we're going to build 2,000 more data centers in the next three to five years. If that doesn't happen, then the entire thesis on the AI investment is going to be thrown out. And that was the calculus that happened today among investors. Then the second piece was the fact that Texas... A very Republican state, or seen as a red state, lost all their battles and switched to the Democratic Party. And there were promises there to go after data centers, which is really what spooked the investors, followed by the complete crash on every other end as everybody started doing some panic selling. Yeah, there is the big question, is the AI race over? Or we know AI is here to stay. And what has happened now is presenting opportunities for other economies to step in. What are your thoughts on that? Look, the AI race is absolutely not over. We are just at the beginning of it, using an American baseball analogy. We are in inning two, inning three of a nine-inning baseball match. The problem is this time, we don't have the regulatory support to get the data centers up there. There needs to be a social compact between the data centers and tech companies with society to figure out how they share in the gains. I think that's really what is at issue here from the American electorate. But the good news is. The concentration of data centers, almost 2,000 being built in the US, 500 being built in China, that means companies like Google or Amazon or everyone else, Microsoft is going to think about putting those data centers in other countries. And that is good for the rest of the world.