AI Regulation Fears Send Global Stocks Tumbling

Global stocks plunged as concerns grew that the U.S. midterm election results could lead to tighter regulation of the artificial intelligence industry. Selling in AI-related shares that began in the United States spread to South Korea, Japan and Taiwan, while New York markets recovered some losses within a day.

Nikkei reported on November 7, citing data from financial information providers Quick and FactSet, that the market value of listed shares worldwide fell by $3.5 trillion on November 5 to $154 trillion. The Nasdaq’s total market value fell by about $2.5 trillion that day, its largest daily decline on record.

The sell-off was attributed to expectations that regulation of the AI industry, including data centers, could tighten after Democrats won the U.S. midterm elections, including races for both chambers of Congress and local offices. Semiconductor and AI-related companies that had driven market gains drew heavy selling. On November 6, Taiwan’s Taiex fell 8.99% early in the session, its largest intraday drop on record, while TSMC, the world’s largest contract chipmaker, fell 9.82% intraday. Tokyo Stock Exchange Prime market capitalization declined by about 77 trillion yen in a day. Samsung Electronics and SK Hynix both plunged in South Korea, and the KOSPI’s market value was estimated to have fallen by more than 3,000 trillion won from its peak.

The previous surge in AI-related shares also contributed to the decline. Since ChatGPT was released in November 2022, global stock market capitalization had grown about 1.6 times, driven by expectations of increased AI investment. The possibility of a shift in U.S. policy emerged as a new factor. On November 6, bargain buying centered on semiconductor shares lifted Nvidia 2.78%, AMD 11.04% and Micron 5.12% in New York. The Nasdaq rose 1.09% and the S&P 500 gained 0.31%, while the Dow fell 0.46%. Takayuki Ishibashi, a vice president at Goldman Sachs Securities, said investors were showing resignation because it was difficult to find a catalyst for a quick rebound.

Global stocks plunged as concerns grew that the U.S. midterm election results could lead to tighter regulation of the artificial intelligence industry. Selling in AI-related shares that began in the United States spread to South Korea, Japan and Taiwan, while New York markets recovered some losses within a day.

Nikkei reported on November 7, citing data from financial information providers Quick and FactSet, that the market value of listed shares worldwide fell by $3.5 trillion on November 5 to $154 trillion. The Nasdaq’s total market value fell by about $2.5 trillion that day, its largest daily decline on record.

The sell-off was attributed to expectations that regulation of the AI industry, including data centers, could tighten after Democrats won the U.S. midterm elections, including races for both chambers of Congress and local offices. Semiconductor and AI-related companies that had driven market gains drew heavy selling. On November 6, Taiwan’s Taiex fell 8.99% early in the session, its largest intraday drop on record, while TSMC, the world’s largest contract chipmaker, fell 9.82% intraday. Tokyo Stock Exchange Prime market capitalization declined by about 77 trillion yen in a day. Samsung Electronics and SK Hynix both plunged in South Korea, and the KOSPI’s market value was estimated to have fallen by more than 3,000 trillion won from its peak.

The previous surge in AI-related shares also contributed to the decline. Since ChatGPT was released in November 2022, global stock market capitalization had grown about 1.6 times, driven by expectations of increased AI investment. The possibility of a shift in U.S. policy emerged as a new factor. On November 6, bargain buying centered on semiconductor shares lifted Nvidia 2.78%, AMD 11.04% and Micron 5.12% in New York. The Nasdaq rose 1.09% and the S&P 500 gained 0.31%, while the Dow fell 0.46%. Takayuki Ishibashi, a vice president at Goldman Sachs Securities, said investors were showing resignation because it was difficult to find a catalyst for a quick rebound.