South Korea’s Kospi index fell 5.3% on Thursday, November 5, closing at 5,383.80. This marks its largest single-day drop in three weeks. The decline led to a temporary halt in program trading on the main exchange. The tech-heavy Kosdaq also faced significant losses, triggering a sell-side sidecar as it dropped below 700. Major companies like Samsung Electronics and SK Hynix contributed to the downturn. This reflects broader concerns about the future of artificial intelligence (AI) investments after the recent U.S. midterm elections.
Key Details
The sell-off spread beyond South Korea, affecting other Asian markets. Taiwan's Taiex and Japan's Nikkei 225 closed down 1.8% and 2%, respectively. Investors worry that a Democratic majority in Congress could lead to stricter rules on AI infrastructure and data center development. SoftBank Group, a key investor in OpenAI, saw its shares drop 6.9%. Semiconductor equipment maker Tokyo Electron fell 9.5%. Advantest, another important player in semiconductor testing, tumbled 15%.
Background
In the U.S., the Nasdaq 100 index decreased by as much as 6.2% before recovering slightly. It ultimately closed down about 4.5%. The S&P 500 also fell 3.1%, showing investor anxiety over the sustainability of the AI boom that has driven economic growth. Ed Yardeni of Yardeni Research said, "I think it’s an AI bubble losing some air very, very rapidly."
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The declines in tech stocks, especially in the semiconductor sector, could lead to more volatility in related markets. This includes the technology and energy sectors. Concerns about tighter rules may weigh on investor sentiment and impact stock prices in the tech industry. Watch for upcoming earnings reports from major tech firms. These may provide more insights into market trends and investor confidence.
Based on reporting by: livemint.com, nbcnews.com