Asian Stocks Plunge as AI Investment Fears Shake Markets

Growing uncertainty over artificial intelligence investment and potential regulatory restrictions in the United States triggered a sharp selloff across Asian financial markets on Friday, November 6, 2026. Japan, South Korea, and Taiwan experienced substantial stock declines as investors reassessed the prospects of the AI industry following major Democratic victories in US midterm elections.

South Korea's Kospi index fell more than 8% shortly after trading began, prompting an exchange trading halt. Japan's Nikkei 225 dropped approximately 7% at the opening, while Taiwan's benchmark Taiex also declined more than 8%, according to Reuters. Markets subsequently showed signs of stabilization as investors began purchasing shares at lower prices.

The regional losses followed a severe downturn on Wall Street. According to Reuters, the Nasdaq fell 5.5%, while companies listed on the S&P 500 collectively lost approximately $3 trillion in market value. The volatility indicator commonly known as Wall Street's fear gauge also surged.

The political uncertainty emerged after Democrats secured control of both chambers of the US Congress and won several closely contested state-level races. According to CNN, investors fear Democratic lawmakers could introduce restrictions or delay projects involving AI infrastructure, potentially weakening an important source of economic growth.

Major technology companies, including Meta, Amazon, and Google, have committed substantial resources to building data centers that support artificial intelligence services. These facilities require extensive semiconductor supplies, creating significant demand for Asian technology manufacturers.

A study by Columbia Business School estimated that AI-related infrastructure investment accounted for nearly all observed US gross domestic product growth by the end of the previous year, according to CNN. However, concerns about the environmental and community consequences of large data center developments have increasingly complicated the industry's expansion.

Charu Chanana, chief investment strategist at Saxo, identified investor panic and concentrated market positions as additional factors behind the severity of the decline.

"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.

Chanana also explained that simultaneous withdrawals from investment positions could intensify market pressure, particularly when borrowed funds and forced asset liquidations become involved.

"When investors begin unwinding these positions simultaneously, the selling can become self-reinforcing, particularly if leverage and forced liquidations are involved," said Charu Chanana, chief investment strategist at Saxo.

The technology sector absorbed particularly heavy losses. South Korean semiconductor manufacturers Samsung Electronics and SK Hynix fell nearly 10% and 12%, respectively. Japanese memory chip producer Kioxia dropped 14%, while Taiwan Semiconductor Manufacturing Company declined as much as 8.5% in Taiwan.

Japanese investment conglomerate SoftBank Group also lost 11%. Meanwhile, the cost of insuring against a potential debt default by the company reached its highest level in four years, according to Reuters.

Dong Baozhen, chairman of asset manager Lingtong Shengtai, questioned the sustainability of valuations across the artificial intelligence sector following the market downturn.

"The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone," said Dong Baozhen, chairman of asset manager Lingtong Shengtai.

He also raised concerns about whether international markets could maintain their AI investment momentum without continued support from US technology stocks.

"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?" said Dong Baozhen, chairman of asset manager Lingtong Shengtai.

Concerns also extended to smaller companies dependent on external financing to expand their AI infrastructure. Higher interest rates and tighter financial conditions have already made fundraising more difficult for these businesses.

US-based cloud computing company CoreWeave, whose financial performance has become an indicator of investor confidence in AI infrastructure spending and borrowing, declined 10%. Its five-year credit default swap spreads also widened to a record level, according to Reuters.

Despite the initial losses, Nasdaq futures subsequently gained 1.4%, while European stock futures reduced their earlier declines and were last trading 0.6% lower. Investor sentiment remained fragile as markets continued assessing the financial returns and political risks surrounding large-scale AI infrastructure investments.