SEOUL – The aftershocks of this week's US midterm elections are reverberating through Asian financial markets, with the Democratic sweep triggering a sharp sell-off in technology stocks and raising questions about the future of AI infrastructure investment.
On Friday, South Korea's benchmark Kospi index plunged more than 8%, falling below the 5,000-point mark for the first time since February. The drop was led by chipmaking giants SK Hynix and Samsung Electronics, each losing over 10% of their value. Investors are clearly worried that the Democratic victory will delay or halt the construction of data centers in the United States, a key driver of demand for memory chips.
The sell-off quickly spread across the region. Japan's Nikkei 225 fell below 60,000 for the first time since mid-May, dragged down by AI-linked stocks such as Kioxia, SoftBank Group, and Advantest. Both the Nikkei and the broader Topix index are now in bear market territory. Taiwan's market also suffered, with TSMC shares dropping as much as 9.8% on Friday – one of the worst days for the world's leading chipmaker since the pandemic.
The rout began in New York on November 5, with chipmakers at the epicenter. AMD and Micron each fell more than 15%, while Nvidia dropped 9%. The Philadelphia Semiconductor Index, which tracks 30 major US chipmakers, plunged more than 12%.
Political backlash against data centers
The market turmoil reflects not just a reassessment of US infrastructure demand, but also a growing political backlash against the data centers that power AI. Democrats campaigned on promises to regulate the industry more tightly, citing concerns about energy consumption, water usage, and local community impacts.
Texas was the starkest example. Governor Greg Abbott, who once vowed to make the state the “epicenter of AI development,” lost to Democrat Gina Hinojosa. She campaigned against data center construction and Abbott's ties to Elon Musk and other tech billionaires. “When I am governor, we will put a pause – a moratorium on any agreements until we can pass laws to make sure that the people of El Paso and Texas have a seat at the table to decide if and how these data centers come into their communities,” Hinojosa said.
Musk, who poured more than US$470 million into House and Senate races, saw his preferred candidates lose in several key contests. His response on Wednesday was characteristically flippant: “Data centers in space looking pretty appealing right now.” OpenAI co-founder Greg Brockman also backed pro-AI and crypto groups, which largely failed to gain traction.
In Georgia, anti-data-center sentiment helped elect Democrat Keisha Lance Bottoms as the state's first Black woman governor. Atlanta had been one of the fastest-growing data center markets in the country, according to CBRE.
This week, voters approved or are on track to approve at least 33 local ballot measures to ban, pause, or limit data centers. A more restrictive environment under Democratic rule could create “incrementally more negative sentiment for AI infrastructure exposed names,” said Amit Daryanani, an analyst at Evercore ISI.
Strategist David Roche, president of Quantum Strategy, warned that the political shift could have broader geopolitical implications. “US foreign policy becomes more unpredictable. War is more, not less, likely. Dying fish flap hardest,” he said.
In a report this week, BMI, a unit of Fitch Solutions, noted that regulatory friction surrounding AI infrastructure will intensify at the “subnational level” through to the end of 2028. Roughly 53% of hyperscaler pipeline growth is concentrated in newly flipped governor states such as Texas, Georgia, Ohio, and Pennsylvania, which are now exposed to heightened slowdown risk.
“We flag the net effect on AI capex as a two-sided risk, where imposed moratoria and compressed project volumes could drag on 2028 activity starts lower, while a Democratic pivot towards state-wide bring-your-own-power mandates and unwound tax exemptions could instead lift the all-in cost per facility,” BMI analysts wrote. “Hence, the direction of our capex forecasts therefore hinges on how vigorously tighter legislation is pursued.”
JPMorgan strategist Michael Cembalest said that planned 2027 data center construction might not be notably affected, but 2028 could be a different story. “While pauses are the more impactful outcome, conditions can be onerous: requiring data centers to pay grid costs to protect ratepayers, ending tax incentives, imposing water limits, setting requirements for onsite backup power, mandating labor requirements and banning non-disclosure agreements during permitting,” he said.
Apollo Global Management is taking a more defensive approach to its AI bets. “We know that society will use dramatically more computing power in the future,” the firm said, but it is hedging against the possibility of tighter regulation.
For Asian economies heavily reliant on semiconductor exports, the political shift in Washington adds another layer of uncertainty. The broader economic outlook for Asia is now clouded by the prospect of reduced US demand for AI hardware. Meanwhile, Taiwan's efforts to control AI chip exports and concerns about technology theft remain pressing issues for the region.
As the dust settles, one thing is clear: the era of unchecked AI infrastructure growth in the United States is over, and Asian markets will have to adapt to a new reality where politics, not just technology, shapes the industry's trajectory.
