The Democrats' victory in the U.S. sent shares of Asian chipmakers tumbling. Will this last?

On November 5, investors on Asian stock exchanges shifted their money from chipmakers’ stocks to those of automakers and consumer companies, according to Bloomberg. After Democrats gained control of both chambers of the U.S. Congress, market concerns intensified that the construction of data centers would slow down. Most analysts do not expect demand for chips to fall, but it appears that even long-term funds are pulling money out of AI-related stocks, which means the outflow of funds from these securities may continue.

Shares of the two largest memory chip manufacturers, Samsung Electronics and SK Hynix, had fallen 7.6% and 9.3%, respectively, in Seoul by 11:00 a.m. Astana time. Due to this decline, South Korea’s main stock index, the Kospi, fell 5.2% to 5,387 points. Early in the session, Kospi futures fell by more than 5%, and the country’s main stock exchange suspended trading for five minutes to reduce volatility, according to The Wall Street Journal. Taiwan’s TAIEX index, which includes TSMC shares, closed down 3.2% at the end of trading in Taipei.

Meanwhile, Japan’s Toyota Motor—which raised its annual forecast thanks to strong hybrid sales—and Honda Motor rose 15.4% and 7.2%, respectively, while the Topix index gained 0.8%. There is a prevailing view in the market that automakers will benefit if U.S. President Donald Trump eases tariffs, Bloomberg notes. The money that investors are pulling out of chipmakers’ stocks has also supported shares of other companies whose businesses depend on consumer demand—from South Korea’s Hyundai to China’s Tencent and Alibaba, the agency reports.

Tour operator stocks have risen due to falling oil prices: the market is increasingly hopeful that the war with Iran will end, according to Bloomberg. Brent futures fell below $100 per barrel on the night of November 5. Since the start of the week, the price of the benchmark crude has fallen by 20%, according to Reuters.

During the election campaign, Democrats capitalized on Americans’ fears of AI, and now the market is worried about delays in the construction of data centers, according to Bloomberg. In Texas and Georgia, Democrats—who oppose data centers and have proposed, among other things, a moratorium on their construction—scored resounding victories, Reuters notes.

The Democrats’ victory has heightened investors’ concerns about the massive debt that companies are taking on to develop AI infrastructure, according to Bloomberg. The agency’s index tracking Asian chipmakers has fallen by more than 20% over the past month. ““We’re seeing a clear continuation of the rotation out of chipmaker stocks. The market is punishing the segments that will suffer the most in the event of tighter regulation, namely the semiconductor sector,” Bloomberg quotes Tim Waterer, chief market analyst at KCM Trade, as saying.

Most analysts believe that the outcome of the U.S. election will not ultimately lead to a decline in demand for AI, data centers, and chips, according to Reuters. However, they now expect at least a temporary slowdown in demand. The impact of the election on AI companies’ profits and supply contracts will likely be limited, as investment schedules for data centers are unlikely to shift significantly, the WSJ notes, citing a report by Kiwoom Securities.

Nevertheless, the outflow of funds from growth stocks could drag on, according to Takehiko Masuzawa, head of equity trading at Phillipcapital Japan. Long-term investors—“global macro funds, sovereign wealth funds, and actively managed pension funds”— — appear to be shifting money from these securities, including those related to AI, into undervalued stocks (value stocks), according to Bloomberg. Once this money starts moving, it’s not easy to reverse the trend, the expert added.

This article was AI-translated and verified by a human editor