Nov 6 (Reuters) – Stock markets fell as investors feared a Democratic victory in the midterm elections would lead to regulation and a slowdown in the AI boom that is propelling IT supply chain stocks around the world.
The Nasdaq fell 5.5% on Thursday, the biggest drop since the “Liberation Day” rout triggered by 2025 tariffs.
In Asia on Friday, South Korea’s KOSPI fell 6% and Taiwan’s benchmark index fell 4.5%, to record its biggest weekly decline in more than two decades. (MKTS/GLOB)
Here’s what market players are saying:
CHRISTOPHER FORBES, HEAD OF ASIA AND MIDDLE EAST, CMC MARKETS, SINGAPORE:
“Actually, it’s a bit of a disaster.
“(The clients) were buyers of indices, stocks, and they were all executed.
“All night, all day, we had customer margin calls, customer complaints, … because it’s a very emotional thing, right? People are attached to their positions and their opinions on a stock or an outcome and you tell them: look, you just lost money.
“And it’s not just a slap in the face in terms of valuation. It’s basically a six-year policy and structural change that says we’re now going to pause, we’re now going to cool AI, we’re now going to cool data centers, approvals and capital markets.”
DONG BAOZHEN, PRESIDENT OF LINGTONG SHENGTAI, BEIJING:
“The liquidation shows that AI’s stock prices were based on rosy illusions about the future, and now that illusion is gone,” Dong said.
“The U.S. stock market has been the standard bearer and backbone of the global AI bull run. Now that backbone has broken. Can AI bull markets elsewhere hold up on their own?”
JASON LUI, HEAD OF APAC EQUITY DERIVATIVES STRATEGY, BNP PARIBAS, HONG KONG:
“We’re actually getting more and more inquiries about domestic China, because what we’ve noticed is that over the last month, Chinese policymakers have stepped up their stabilization measures.
“Clients tend to view China’s domestic trade as a potential means of diversification from their global portfolio which tends to be driven more by US AI.”
ALLEN HUANG, VICE PRESIDENT, EQUITY TRADING DEPARTMENT OF MEGA FINANCIAL HOLDING:
“Today we will inevitably see further liquidation of margin accounts, which suggests that we are likely in the final stages of capitulation.
“Even TSMC flipped its daily limit breaker at one point, which usually marks the end of a downturn. When TSMC sells, it means all stocks have been completely undervalued.”
STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS, NEW YORK:
“Investors were already beginning to wonder whether all the copious spending on AI would yield sufficient returns to justify billions in debt and equity.
“When a group of stocks is widely owned, priced to perfection, and critical to the bull market thesis, there isn’t much room for error if their fundamentals appear threatened.
“After damage like we’ve faced, it’s hard to think we can just bounce back from here. We may be oversold in the short term, but the underlying issues and causes can’t just be erased.”
SHANE OLIVER, CHIEF ECONOMIST AND HEAD OF INVESTMENT STRATEGY, AMP, SYDNEY:
“Investors are trying to understand what the Democratic victory might mean and they don’t yet know it completely. This speaks to the broader concern that tech and AI deals were trading at relatively high multiples, making them vulnerable. This concern had been building for some time now, and one could argue that the midterm elections were the trigger for a pullback.
“It is too early to say that markets have bottomed, but provided the economic outlook is not affected, it is likely to be more of a correction than a bear market.”
GEORGE BOUBOURAS, RESEARCH MANAGER, K2 ASSET MANAGEMENT, MELBOURNE:
“The selloff in AI and technology, which began a few months ago, both in terms of valuation and impact on free cash flow, has now accelerated due to the prospect of U.S. data center deployment being impacted by the change in the Senate and House after the midterms.
“Significant data center deployment is now expected to be reduced. The unknowns will continue to create uncertainty for markets.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
“I caution you against interpreting that Democrats are ending the AI boom. AI leadership remains a strategic priority for both parties, especially in the competition with China. But there is a difference between supporting AI leadership and allowing infrastructure to be built at any price and at any pace.
“There is also clearly an element of panic in the selling, and the positioning makes the adjustment much more violent. When investors begin to unwind these positions simultaneously, the selling can be self-reinforcing, particularly if leverage and forced liquidations are involved.”
MICHAEL MCCARTHY, CEO, MOOMOO AUSTRALIA & NZ, SYDNEY:
“It’s pretty clear that there’s been a real change in sentiment.
“Market turning points are often accompanied by strong disagreements, and that manifests itself in the market as huge swings in either direction. And that’s what we seem to have – and last night’s sell-off – suggests that’s the direction we’re heading now.
“It’s entirely possible that this could be a significant turning point for the U.S. market…I think a lot of the big U.S. players said in last night’s action that the music has stopped. It’s game over.”
MARK FUCHS, CIO, FUCHS CAPITAL PARTNERS, SINGAPORE:
“Democrats came in with a more circumspect view of data centers and AI…so there’s a bigger picture that is probably a small reduction in spending, due to higher bars on data centers in general.
“Asian tech, as a whole, is still being repriced lower due to expectations that demand will be somewhat more constrained… as well as markets pricing the cost of capital higher since the Fed began raising rates in September.
“Most importantly, excluding the new Democrat data center constraint, the reality is that this sector has been revalued downward for over a month.
“We prefer more non-AI sectors and countries that offer higher nominal GDP and sustainable domestic growth stories, such as India, while hedging the currency and index.”
(Reporting by Rae Wee, Ankur Banerjee and Gregor Stuart Hunter in Singapore and Roger Tung in Taipei and Reuters Shanghai newsroom; compiled by Tom Westbrook; editing by Thomas Derpinghaus and Jacqueline Wong)
