This update was written automatically with AI from market data and news wire reports, and published without review by a person.
Key Takeaways
- Global technology stocks plunged as the Nasdaq Composite fell 5.5% and the Nikkei 225 dropped over 6%, driven by fears that a Democratic sweep in the US midterms will lead to tighter AI regulations and a slowdown in data center expansion.
- Asian markets faced a "capitulation-level" event, with South Korea’s KOSPI and Taiwan’s TAIEX suffering heavy losses before narrowing declines to 3.9% and 4.7% respectively in late trading.
- Japan Tobacco (JAPAY) shares plummeted in Tokyo after President Vladimir Putin signed a decree placing the company’s Russian assets under "temporary state management," a move Tokyo has formally protested.
- US equity futures showed signs of a fragile recovery, with Nasdaq 100 futures rising 1.3% as investors attempted to find a floor following the massive AI-led selloff.
- Trade policy shifts are looming as senior Democrats signal plans to move "very quickly" to reverse President Trump’s tariffs on Canadian imports within the first 100 days of the new Congress.
AI Boom Under Threat Following Democratic Sweep
Global markets are reeling from a massive selloff in the artificial intelligence sector after the US midterm elections resulted in a "Blue Wave," with Democrats taking control of both the House and Senate. Investors are pricing in a significant shift in the regulatory landscape, fearing that the new Congress will introduce stricter oversight on data center construction, environmental impact, and AI safety. This political shift has added a "risk premium" to an AI investment cycle that was already facing scrutiny over high valuations and massive capital expenditure.
The impact was most severe in Asian hardware hubs that are central to the global AI supply chain. South Korea’s Samsung Electronics (SSNLF) and SK Hynix (HXSCL) saw sharp declines, while Taiwan Semiconductor Manufacturing Co. (TSMC (TSM)) also faced heavy selling pressure. Analysts suggest that the potential for Democratic governors to clamp down on new data center rollouts due to electricity costs and environmental concerns is a primary driver of the current "sell everything" mentality in tech.
Geopolitical Tensions Hit Japan Tobacco
In a significant escalation of bilateral tensions, Russian President Vladimir Putin signed a decree on Thursday placing the Russian assets of Japan Tobacco (JAPAY) under temporary state management. The move targets the company's international division, which holds a nearly 40% market share in Russia and generates approximately a quarter of the group's total profit. Japan's Finance Minister, Satsuki Katayama, confirmed that Tokyo has lodged a formal protest, demanding an immediate reversal of the seizure.
The decree transfers control of four manufacturing operations to a Russian entity called Industrial Assets. This development follows a pattern of the Kremlin seizing assets from "unfriendly" nations as a countermeasure against Western sanctions. Shares of Japan Tobacco were indicated as much as 19% lower in Tokyo trading as the loss of its Russian business represents a critical blow to its global operations.
Markets Search for Stability Amid Hedge Fund De-risking
Institutional investors and hedge funds have been rapidly reducing their equity exposure as the selloff deepens. Reports indicate that hedge funds have cut gross equity exposure at the fastest rate since 2016, with Goldman Sachs (GS) noting that five consecutive sessions of net selling have reversed nearly all cumulative AI stock purchases made since early 2025. This aggressive de-risking has left the market devoid of buyers, leading to "top-down macro selling" across major indexes.
Despite the carnage, Nasdaq 100 futures jumped over 1% in early Friday trading, suggesting a potential technical rebound. Similarly, benchmark indices in South Korea and Taiwan managed to recover some ground from their session lows. However, market strategists warn that until there is clarity on the new US administration's regulatory agenda for AI and data centers, volatility is likely to remain elevated.
Democrats Target Trump’s Trade Policies
On the trade front, the Democratic victory has immediately shifted the focus to President Trump’s tariff agenda. Senior Democratic Representative Jamie Raskin stated that the party intends to work "very quickly" to end tariffs on allies, specifically highlighting Canada. The goal is to rescind many of the president's trade authorities and remove the 50% tariffs that have strained relations with democratic partners. While the President retains veto power, the shift in Congressional control creates a significant legislative hurdle for the continuation of aggressive trade barriers.
Automated market updates written with AI from market data and news wire reports, published without human review.