A dramatic tech-led sell-off on Wall Street, ignited by concerns over the artificial intelligence boom, sent shockwaves across global financial markets last week, with the contagion quickly spreading to bourses across Asia.
A Correction Ignited in the US
The trouble began on Thursday,
November 5, when US markets saw their worst day since April 2025. The tech-heavy Nasdaq Composite plunged 5.5%, officially entering what is known as a 'correction'—a drop of more than 10% from its recent peak. The S&P 500 fell 4.4%, wiping out an estimated $2.5 trillion to $3.2 trillion in market value in a single day. At the heart of the rout were the darlings of the market: AI-related stocks. Major chipmakers and technology giants experienced steep declines, with Nvidia falling 9.3% and AMD plunging over 17%. The sell-off was broad and brutal, reflecting a sudden and sharp shift in investor sentiment away from the sector that has dominated market gains for months.
The AI Overheating Factor
So, what caused investors to suddenly turn on AI? A combination of factors created a perfect storm. For months, analysts had warned that valuations for companies associated with AI were reaching historically high levels, reminiscent of the dot-com bubble. Investors began questioning the massive capital expenditure required to build out AI infrastructure, like data centres, and when those investments would actually turn a profit. The immediate trigger appeared to be the results of the US midterm elections. Sweeping victories for Democratic candidates raised fears of increased regulation and a potential slowdown in the construction of new data centres, particularly in key states like Texas. This political shift, combined with concerns over high interest rates and whether the AI spending spree was sustainable, was enough to turn market optimism into a rush for the exits.
Contagion Spreads Across Asia
The heavy selling in the US quickly spilled over into Asian markets as they opened for trading on Friday, November 6. The impact was most severe in tech-heavy economies. South Korea's KOSPI index plunged by as much as 9% at one point, triggering a temporary trading halt. Japan's Nikkei 225 fell nearly 6%, and Taiwan's TAIEX dropped 4.5%. Major Asian technology firms saw their shares plummet. In South Korea, Samsung Electronics and SK Hynix fell sharply, while in Japan, AI-related stocks like SoftBank Group and Rohm also suffered significant losses. The widespread downturn demonstrated how interconnected global markets have become, especially in the technology sector, where supply chains and investor sentiment are tightly linked.
A Rebound, But Caution Remains
Following the sharp correction, markets did show signs of stabilising. US stocks saw a partial rebound on Friday, which helped lift Asian markets on Monday, November 9. Taiwan's market, in particular, saw a strong recovery, with chipmaker TSMC jumping over 5%. However, the mood remains one of caution. Investors are still weighing the same core concerns: the high cost of AI investment, the potential for tighter regulation, and the risk of a global economic slowdown. While some analysts see the drop as a healthy and perhaps inevitable 'letting of air' from an overinflated bubble, others warn that valuations remain high and the correction may not be over. The incident has served as a stark reminder that while the longterm promise of AI is significant, the path there is likely to be volatile.
