Kospi Closes Down 5.3% and the Nasdaq Falls 5% as the Midterm Rally Turns Into an AI Sell-Off

The relief rally lasted one day. South Korea's Kospi closed 5.28 percent lower at 5,383.80 on Thursday, with Samsung Electronics down 7.57 percent and SK hynix down 9.46 percent, after a sell-side sidecar halted programme trading at 10.16am, the exchange's 56th of the year, the Seoul Economic Daily reported. By the time New York opened the same trade had crossed two oceans: the Nasdaq Composite was down 5 percent by late afternoon, the S&P 500 3.8 percent and the Dow about 1,566 points, giving back almost all of Wednesday's 1,569-point gain, CNBC's live coverage recorded.

The reason, on both sides of the Pacific, was the same reading of Tuesday's result: a Democratic Congress is more likely to regulate AI data centres, and therefore to slow the capital spending that has carried chipmakers for two years. Bernie Sanders has called for a national moratorium on data-centre construction and voters in several states rejected AI expansion on their ballots. Our report on Tuesday's Kospi fall described the same stocks going the same way for a different reason.

What happened in Asian markets on Thursday?

Asia split. Hong Kong's Hang Seng closed up 3.68 percent at 24,798.69 with the Hang Seng Tech index up about 5 percent on Tencent and Alibaba, Shanghai gained and Australia's S&P/ASX 200 rose 1.9 percent to 9,003.40 as lower oil lifted everything that is not a semiconductor, the Associated Press reported. The Kosdaq fell 5.11 percent to 678.41. Tokyo was two markets at once: the Nikkei 225 slipped about 0.5 percent to 61,914 late in the morning as Advantest fell 9.4 percent, Tokyo Electron 7.7 percent and SoftBank 5.3 percent, while the broader Topix rose 1.4 percent on Toyota and Honda, each up about 5 percent on hopes of tariff relief. Taiwan's Taiex lost 1.6 percent.

How did European stocks trade after the Bank of England decision?

European shares rose through the morning and London added to its gains after the Bank of England's hike to 4 percent, then gave ground once Wall Street opened lower.

Why did Wall Street fall on Thursday?

Micron and AMD fell 16 percent, Nvidia 8 percent at the worst point, Broadcom 6 percent and Qualcomm 11 percent after a weaker outlook, with the SOXX semiconductor fund down 11 percent, its worst day since March 2020. CoreWeave, Nebius and Iren, the data-centre landlords, fell 9, 13 and 14 percent. Tesla and SpaceX each dropped more than 9 percent on worries that a Democratic Congress and Democratic wins in Texas complicate a possible merger. By afternoon the selling had reached Caterpillar, JPMorgan and Boeing. The VIX jumped more than 65 percent to 27.45, its biggest one-day rise in over two years, and the Dow was on course for its worst post-midterm session since records began in 1896, Yahoo Finance noted.

Tim Holland of Orion said investors were stepping away until they understand what the midterms mean for AI capital spending. Truist's Keith Lerner said the tech sell-off was feeding into the broader market. The numbers underneath were not bad: initial jobless claims fell to 189,000, near the lowest since 1969, third-quarter productivity rose 3.6 percent and Apollo's Torsten Slok put S&P 500 earnings growth near 40 percent year on year. The 10-year Treasury yield fell six basis points to 4.83 percent and the chance of a December Fed hike dropped to 70 percent from 83.

Friday's jobs report is the next number. Seoul reopens first, and the retail investors who have been praying at a virtual Buddhist temple for Samsung, SK hynix and bitcoin, as the Seoul Economic Daily found, will learn whether New York's close gave them anything to pray about.