Asian technology stocks suffered steep losses on Friday as investors extended a sell-off in global equities, with concerns over the sustainability of artificial intelligence investment and the potential for tighter US restrictions on data center construction hitting semiconductor manufacturers and technology investors.
South Korean chipmakers led the regional decline. SK Hynix plunged 10.44%, while Samsung Electronics fell 6.35%. LG Innotek lost 7.02%, and LG Display declined 4.45%, as investors reduced exposure to companies closely linked to the global technology supply chain.
The selling also spread across Japan, where semiconductor equipment manufacturers and companies with significant AI investment exposure came under pressure. Advantest, which makes chip-testing equipment, dropped 4.99%, while Tokyo Electron fell more than 5%. SoftBank Group, a major technology investor, tumbled 10.83%.
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Memory chipmaker Kioxia Holdings declined 8.72%, while Renesas Electronics lost 5.74%. In Taiwan, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, fell 4.69%.
Chinese technology shares were also affected, with the technology-heavy STAR Market and the ChiNext Artificial Intelligence Index both losing more than 4%.
The regional losses followed a severe downturn on Wall Street on Thursday. The Nasdaq Composite plunged 5.5%, pushing the index more than 10% below its recent peak and into correction territory. The Philadelphia Semiconductor Index fell 12.2%, underscoring the pressure on companies at the center of the AI hardware boom.
The immediate trigger was renewed concern that the Democrats’ sweeping victory in the US midterm elections could complicate the expansion of data centers. Political opposition to new facilities could delay projects, increase development costs and slow the pace of investment by major cloud providers.
The concern matters much for Asian semiconductor companies because the AI infrastructure boom has become an important source of demand for advanced processors, memory chips, networking equipment and semiconductor manufacturing tools.
The market reaction exposes the growing dependence of Asian technology manufacturers on the spending decisions of US hyperscalers, including the largest cloud and technology companies investing heavily in AI infrastructure.
SK Hynix and Samsung are major suppliers of memory chips used in advanced computing systems, while TSMC manufactures processors designed by leading technology companies. Advantest and Tokyo Electron supply equipment and technologies used in semiconductor production.
These businesses have benefited from expectations that AI development will require sustained increases in computing capacity. Data centers need large quantities of high-performance chips and memory, creating opportunities for manufacturers throughout the semiconductor supply chain.
However, the scale of future demand lies on infrastructure projects proceeding as planned and technology companies generating sufficient returns from their investments.
The midterm election results have introduced uncertainty into that outlook. Opposition to data center developments could become more influential at state and local levels, where decisions on land use, electricity connections, water availability, environmental requirements and construction permits are often made.
Even without a nationwide halt to data center construction, delays in individual states could affect project schedules and the timing of equipment orders. That uncertainty matters to chipmakers because semiconductor production involves substantial capital commitments and long planning cycles. Manufacturers must make decisions about capacity, inventory and investment before the full extent of customer demand becomes clear.
The concern is therefore not necessarily that AI demand will disappear, but that the pace of infrastructure expansion could fall short of the expectations already built into technology stock valuations.
Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, told CNBC’s Squawk Box Asia that the prospect of political opposition to US data center construction could affect demand and profits for Asian AI hardware suppliers.
“If there’s concern about the speed and magnitude of buildout in the U.S., then obviously that’s going to put all that into question,” he said.
Moe added that investors were reacting aggressively to the uncertainty, with market participants selling first and assessing the longer-term implications later.
“The market’s tendency is always to shoot first and ask questions later. I think that’s exactly what’s happening now,” he said.
Forced Selling Deepens Regional Market Losses
The scale of Friday’s losses also suggests that the sell-off extended beyond a reassessment of the AI industry’s long-term prospects. Moe said investors were unwinding positions, triggering stop-loss selling and contributing to heightened volatility.
That process can accelerate declines when heavily owned stocks fall sharply. As prices breach predetermined risk limits, investors and trading strategies may automatically reduce exposure, creating additional selling pressure even without a corresponding change in corporate earnings forecasts.
This is deemed essential for semiconductor stocks, which have attracted significant investor interest during the AI investment boom. Their valuations have been supported by expectations of strong demand for advanced chips and related equipment. When those expectations come under pressure, investors can move quickly to lock in gains or reduce exposure.
The simultaneous declines across South Korea, Japan, Taiwan and China show how closely regional technology markets are tied to the same investment cycle. Companies may operate in different parts of the semiconductor supply chain, but their earnings outlooks are linked to the expansion plans of a relatively small group of major technology customers.
The contrast with European markets was notable. European stocks were broadly lower on Friday, but technology was among the least affected sectors, declining about 0.25% in morning trading. Semiconductor equipment makers ASML and ASMI gained 4% and 3%, respectively.
That divergence suggests the sell-off was not affecting every technology company in the same way. Differences in valuations, investor positioning, business exposure and expectations for future orders can produce sharply different market reactions even among companies serving the same industry.
Friday’s losses demonstrate how quickly uncertainty surrounding US data centre policy can travel through the global technology supply chain. Asian chipmakers have been major beneficiaries of the AI investment cycle, but their exposure also leaves them vulnerable when investors begin questioning the pace, financing and profitability of that expansion.