The key facts

  • Samsung Electronics down 7.6%, SK Hynix down 5.1%, Kospi down 5.3% in Asian trading
  • The Korean exchange suspended program trading for five minutes via the sidecar mechanism
  • The Democrats took both chambers of Congress and key governor's posts, including Texas and Georgia

Chip sector under pressure

Asian shares of companies tied to semiconductors and artificial intelligence fell sharply on Thursday amid concerns that the Democrats' victory in the US midterm elections would lead to tighter oversight of data center construction, Anadolu reports. South Korea's SK Hynix lost 5.1%, Samsung Electronics 7.6%, dragging the Korean Kospi index down 5.3%. Taiwan's Taiex fell 3.2%, and Japan's Nikkei 225 dropped 1.8%.

Exchange activated protective mechanism

The fall in the Korean market was so intense that Korea Exchange activated the 'sidecar' on the sell side at 01:16 GMT — a temporary five-minute suspension of program trading. In Japan, chip equipment makers were hit hardest: Advantest fell 14.7%, Tokyo Electron 9.4%, and investment company SoftBank Group 6.8%.

The reason: elections and data centers

As Anadolu notes, following the elections the Democrats won both chambers of Congress and took key governor's races, including Texas and Georgia, where resistance to rapid data center expansion centers on electricity costs and the strain on local resources. The results raised the likelihood of additional restrictions on construction in the industry's main hubs, which implies a potential slowdown in demand for chips and equipment. An additional source of pressure came from weak earnings reports from American chip developers Qualcomm and Arm: the Philadelphia Semiconductor index had already lost 3.1% on Wednesday.

The rest of the market rose

Notably, the decline affected precisely the semiconductor segment: Hong Kong's Hang Seng gained 3.5%, Australia's S&P/ASX 200 rose 2.4%, and Japan's Topix added 1.5%. Oil, after plunging more than 8% on Wednesday, stabilized amid expectations that the election results could increase pressure to end the US–Iran conflict: Brent rose 0.4% to $95 per barrel, while WTI fell 0.2% to $87.90. Cheaper fuel supported airlines — Japan Airlines, Singapore Airlines and Cathay Pacific. The day before, the Dow Jones rose about 3%, the S&P 500 1.6%, and the Nasdaq 1.4%.