The key facts

  • The Democrats won both chambers of Congress in the midterms, triggering a sell-off in AI stocks
  • Nikkei 225 rose more than 3%, TSMC almost 6%, and the Kospi jumped sharply
  • Markets put the probability of a December Fed rate hike at roughly 80%

Rebound after the sell-off

Chipmakers and other companies tied to the artificial intelligence boom suffered heavy losses after the US midterm elections, in which the Democrats won control of both chambers of Congress — a blow to Donald Trump and the Republican Party. According to euronews, the election results pointed to voter discontent with the war with Iran and with tariffs that had driven up prices, as well as a strong backlash against the massive construction of data centers across the country. This raised speculation that the new Congress might try to rein in tech companies' construction activity, potentially putting thousands of jobs at risk.

Asia leads the recovery

After Thursday's plunge on Wall Street, some stability arrived at the end of the week, and Asia — which had also seen a sharp drop on Friday — largely followed that trend at the start of the new week. Tokyo, Seoul and Taipei, home to a high concentration of AI tech giants, led the gains: Japan's Nikkei 225 rose more than 3% thanks to a rally in Kioxia, Tokyo Electron and Advantest shares; SK hynix and Samsung gained about 3%, lifting South Korea's Kospi; and Taiwan's TSMC surged almost 6%, pushing the Taiex index up 5%. Gains were also recorded in Hong Kong and Shanghai, while Sydney, Wellington and Manila slipped slightly.

What's next: regulation, inflation and Nvidia

Uncertainty persists: traders are already nervous about when the hundreds of billions of dollars invested in the sector will start paying off. «Concerns around AI regulation, the outlook for capital spending and free cash flow have driven risk reduction in recent weeks, and it is unlikely these issues will be resolved with any certainty any time soon,» said Sally Auld of National Australia Bank, adding that the valuation of many tech stocks now looks less stretched. Investors are also awaiting new US inflation data: on Friday, statistics showed the economy created far more jobs in October than expected, and these figures will be key for the Federal Reserve's decision on a rate hike at its December meeting — markets put the odds at roughly 80%. Separate attention is focused on Nvidia, which has launched an independent investigation following reports that CEO Jensen Huang was in a relationship with an alleged Chinese spy. The company said the board has no reason to believe its secrets or national security were compromised, and that Huang intends to continue leading the company.