Global Tech Rout Deepens as AI Regulation Fears Spark $3 Trillion Wipeout

A rout in technology stocks that began on Wall Street Thursday swept across Asia on Friday, driven by fears that Democratic gains in the US midterm elections will bring increased regulatory scrutiny of artificial intelligence and slow the country's data centre build-out. The sell-off erased roughly $3 trillion in market value from S&P 500 companies, according to Al Jazeera.

Japan's Nikkei 225 slumped 6 percent, its deepest one-day drop since April 2025, Al Jazeera reported. South Korea's KOSPI plunged more than 8 percent at the open, triggering a 20-minute trading halt, before recovering to close down 3.9 percent, according to Al Jazeera. Business Insider reported the KOSPI ended the day 6 percent lower. Taiwan's benchmark index fell more than 8 percent at the open before closing down 4.5 percent, Al Jazeera said. For the week, Taiwan's index clocked a 12.2 percent decline, its biggest since 1991, according to LSEG data cited by Al Jazeera.

In mainland China, the Shanghai Composite Index fell 1.1 percent, while the tech-focused Star 50 Index and the AI Index slumped as much as 5 percent before recouping some losses, Freemalaysiatoday reported. Hong Kong's Hang Seng Index was down 1 percent, and the Hang Seng Artificial Intelligence Index tumbled 4 percent.

The selling was broad-based across the AI hardware supply chain. South Korean memory chip makers Samsung Electronics fell nearly 6 percent and SK Hynix dropped 9.4 percent, Al Jazeera reported. Business Insider said Samsung fell 11 percent and SK Hynix 14 percent. Taiwan Semiconductor Manufacturing Co. fell as much as 8.5 percent before closing down 4.7 percent, according to Al Jazeera. In Japan, Kioxia plunged 11 percent and AI investor SoftBank Group slid 11 percent.

The panic followed a brutal session on Wall Street Thursday. The tech-heavy Nasdaq Composite sank 5.5 percent, its biggest single-day decline since April 2025, wiping trillions off market value, Al Jazeera reported. The S&P 500 dropped 4.4 percent and the Dow Jones Industrial Average lost 3.4 percent, or more than 1,800 points, according to NDTV Profit. The Philadelphia Semiconductor Index plunged 12.2 percent, one of its steepest single-day declines on record, NDTV Profit said. The so-called Magnificent Seven — Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta Platforms and Tesla — lost more than $1 trillion in combined market value during the session, with Nvidia accounting for more than $440 billion of the decline, NDTV Profit reported. Nvidia fell 9.3 percent and Advanced Micro Devices dropped 17.3 percent.

The sell-off was sparked by the prospect that Democratic control of Congress will lead to tighter regulation of AI and data centre construction. Texas has emerged as a particular focus of market anxiety, according to NDTV Profit. The state accounts for about 25 percent of planned US data centre capacity, according to Goldman Sachs estimates cited by NDTV Profit. Democrat Gina Hinojosa defeated Republican Governor Greg Abbott in a surprise victory and has pledged to halt new data-centre approvals until the state introduces rules to protect residents from higher electricity and water costs, NDTV Profit reported.

Analysts said the political jitters are hitting an AI trade already on shaky footing due to worries about returns on massive spending on related infrastructure. "The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone," Dong Baozhen, chairman of asset manager Lingtong Shengtai, told the Reuters news agency, as quoted by Al Jazeera and Freemalaysiatoday. "The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped. Can AI bull markets elsewhere hold up on their own?"

Toby Walsh, chief scientist for the AI Institute at Australia's University of New South Wales, told Al Jazeera he expected new regulations on data centres in many countries, including the US, Australia and the United Kingdom. "The developers were building them in a way that wasn't actually getting social licence," Walsh said. "They were building them in places where they didn't need to build."

Authorities stepped in to stem the panic. South Korea's Finance Minister Lee Hyoung-il eased rules on retail investors' leveraged investments, Al Jazeera reported. In China, state entities stepped in to buy up equities in a bid to stabilise the market, according to Al Jazeera's Katrina Yu. Taiwan's economy ministry issued a statement saying demand for emerging technologies like AI, high-performance computing and cloud services is expected to keep expanding, Al Jazeera reported.

By Friday morning in the US, some dip-buying emerged. The Nasdaq 100 gained more than 1 percent, with Nvidia up 6 percent, according to Business Insider. The Dow, however, extended its decline, dropping another 500 points. A stronger-than-expected October jobs report — the US economy added 165,000 payrolls — raised the odds of a December rate hike from the Federal Reserve to about 80 percent, Business Insider reported, citing CME FedWatch.

The rout comes against a backdrop of pre-existing market fragility. A Reuters analysis published Nov. 3, carried by wkzo.com, noted that financial markets were already struggling under the weight of wars, soaring sovereign debt and trade tensions. "Rising rates always seem to sniff out and expose the most vulnerable time after time," Jim O'Neill, former Goldman Sachs chief economist, told Reuters. He said if inflation did not ease, the risks stemming from the vast amount of debt-financed investment flowing into the AI sector would grow. The analysis noted that more than $2 trillion in market value was wiped from the tech-heavy Nasdaq 100 in October alone as Big Tech earnings intensified scrutiny of AI spending.