Asian markets experienced their most severe decline in recent memory, losing over $1.2 trillion in value on Friday following a brutal US tech selloff that erased roughly $3 trillion in market value. South Korea's tech-heavy Kospi Index crashed from 5,683 to 5,069, logging a 10.80% loss in the last two straight sessions, with Samsung Electronics shares shedding 13.50% after the announcement of US midterm election results. Japan's benchmark Nikkei 225 Stock Average fell from 62,188 to 57,269, recording a 7.90% loss after the humiliating defeat of Donald Trump's Republican Party in the US midterm elections. Taiwan's weighted index nosedived from 42,948 to 39,701, clocking a 7.56% loss after the announcement of the US midterm election results. Hong Kong's Hang Seng fell 0.92% on Friday, while the CSI 300 Index plunged 1.45% on Friday after initially going up on Thursday. On Friday alone, the Nikkei fell about 6%, its deepest drop since April 2025, while Taiwan's 12.2% weekly decline was its biggest since 1991. Technology stocks were among the worst hit, with semiconductor companies facing particularly heavy selling as global investors rotated out of US data center infrastructure positions into deeply discounted Chinese internet platforms.
The latest market decline was triggered by the sweeping victory of Democratic Party in the US midterm elections 2026, which triggered a massive sell-off in AI and semiconductor stocks across global markets. In the US stock market, flagship AI and semiconductor stocks NVIDIA, AMD, and Micron shares crashed by up to 17%, wiping out $2.50 trillion in wealth from Wall Street, according to a BBC report. The tech-heavy Nasdaq Composite crashed over 5.50% and finished at 24,315, while the Dow Jones Industrial Average crashed by close to 3.50% and finished at 51,523, and the S&P 500 index nosedived by 4.36%. AI poster boy NVIDIA share price opened lower at $196.07 per share and finished at $181.60 per share, logging an intraday loss of 9.26% against Wednesday's close of $200.13 per share. Advanced Micro Devices (AMD) opened lower at $452.50 per share and ended at $404.40 apiece, recording an intraday loss of 17.26%, while Micron Technology Inc. shares saw strong selling pressure and ended 17.46% lower at $656.39 per share. Investors feared that the Democrats' strong midterm gains could bring tighter AI rules, with voters rejecting data center proposals in 39 of 40 completed ballot measures. As reported by The National, Vijay Valecha of Century Financial expects more congressional hearings on who will pay for the power-hungry buildout, while Goldman Sachs estimates that Texas hosts about 25% of planned data center capacity, leaving AI projects exposed to local political shifts.
China's financial regulator has issued a stark warning about the rapid capital deployment in artificial intelligence, with Xiao Yuanqi, vice head of China's National Financial Regulatory Administration, delivering the cautionary message at the Hong Kong Monetary Authority's Global Financial Leaders' Summit. According to reports from the summit, Xiao warned that global capital is flooding into artificial intelligence too fast, creating significant risks for both traditional industries and financial stability. The regulator specifically highlighted that heavy inflows into leading AI firms have fueled excessively rapid expansion, leading to what he described as a 'crowding-out effect' as borrowing costs rise for traditional sectors. As reported by nstartup, the warning emphasized the need for specific frameworks for macroeconomic management and risk prevention to address the AI capital surge, with concerns about doubt that AI companies and other tech firms will ever earn back the money spent on their products. Dong Baozhen of Lingtong Shengtai told Reuters that AI stock prices rested on 'rosy illusions about the future,' while Theodore Shou of Yiyi Capital told CNN that 'there has been too much of a hype earlier this year.' However, Fibonacci Asset Management's Jung In Yun still expects chip demand to grow despite the current correction.
The latest crash has pushed all four major Asian benchmarks into bear market territory, with indices trading between 22% and 48% below their records. The Nikkei, Kospi, TAIEX, and Hang Seng all sit in that zone, signaling deep investor pessimism. The CSI 300 index slumping by 8.5% last month and becoming a bear market on October 20 after a 20% drop, while the Star 50 index in Shanghai has plunged by about 40% in less than four months, with share losses of approximately $480 billion. The CSI Artificial Intelligence Index, which tracks major companies connected to the sector, fell nearly 40% from its June peak, with state-backed semiconductor producer Cambricon Technologies, frequently described as 'China's Nvidia,' among the companies leading the decline. ChangXin Memory Technologies (CXMT), a Chinese memory-chip maker, has lost about 30% of its share value since late September, despite state-backed purchases picking up last month. The pressure on Asia also predates this week, with the Institute of International Finance (IIF) reporting $33.8 billion in emerging market portfolio outflows in October, according to the IIF, only the 2020 COVID shock and March's Iran war shock produced larger outflows.
Despite the severe declines, governments now try to limit the damage as markets enter bear territory. South Korea eased margin rules to curb forced selling, while Chinese state entities bought stocks to provide support. News of Beijing's intent to support local markets helped lift Shanghai by 1.08% on Monday, while the Hang Seng in Hong Kong was also up 0.42%. At the same summit, Vice Premier He Lifeng reaffirmed Beijing's support for Hong Kong, describing the city as a key financial center and offshore yuan hub. According to summit reports, He pledged to keep the external yuan circuit open and increase its liquidity, while Beijing plans to expand sovereign and corporate bond issuance in the currency. Chief Executive John Lee highlighted the city's stability and competitiveness, pointing to commodities trading, digital assets, and green bonds as key sectors. However, mainland Chinese investors have become a less dependable source of support for Hong Kong shares, with their share of Hong Kong market trading by value at 21.4% in the April-to-June quarter, 5.2 percentage points below its peak in July-to-September 2025.
