Taiwan Loses 12.2% for the Week as Asian Chip Stocks Fall Under AI Concerns
Key Facts
Taiwan’s weighted index ended the Nov. 6 session down 4.5%, bringing its weekly loss to 12.2%, the largest since 1991, according to a Reuters report. TSMC shares fell 4.7% at the close after dropping as much as 8.5% during trading. The moves came amid a sell-off in technology and chip stocks after U.S. markets fell in the previous session. Market reports linked the pressure to concerns that restrictions on the artificial intelligence sector could tighten after Democrats won control of both chambers of Congress. Concerns about returns on heavy spending on AI infrastructure also heightened investors’ sensitivity to the sector.
Losses spread to other Asian markets, though their severity varied during the session. Reuters said South Korea’s and Taiwan’s indexes fell more than 8% after the opening bell before trimming losses as authorities moved to halt the sell-off. In Nov. 6 trading, Taiwan’s weighted index fell 4.1%, the Shanghai Composite 1%, the CSI 300 1.3% and the Hang Seng 0.3%, according to data cited by Investing.com. In the semiconductor sector, shares of Chinese memory company CXMT and TSMC fell 6.37% and 7.37%, respectively, during the sell-off tracked by a Chosunbiz report. The moves show that pressure affected regional indexes and chipmakers’ shares, with measurement times differing between early trading and final closes.
The Asian sell-off followed broad losses in New York in the previous session. The Dow Jones Industrial Average fell 3.44%, the Nasdaq Composite dropped 5.52%, and the S&P 500 fell 4.36%, according to Chosunbiz. Pressure on AI stocks came as concerns about returns on massive spending on related infrastructure were already in focus. A Reuters report said the downturn triggered margin calls and unsettled retail investors and hedge funds. Michael McCarthy, chief executive of Moomoo in Australia and New Zealand, described the shift in sentiment as "very clear." He added that market turns are usually associated with strong disagreements that show up in sharp moves in both directions.
Political concerns followed Democrats’ victory in winning control of both chambers of Congress, according to the Associated Press. A Chosunbiz report linked the sell-off to expectations of tighter AI regulation and reduced investment in data centers, and what that could mean for demand for memory chips; this remains an explanation for market moves cited by reports. The Associated Press cited a Morgan Stanley analysis saying the Democrats’ decisive results bolster expectations of restrictions on data centers. The analysis also said Democrat Amy Acton’s victory in the Ohio governor’s race creates "significant risks of delays to data center projects in the state." Results from local referendums support this political focus on project locations: restrictions passed in 44 of 45 referendums that had completed counting, in an analysis covering 47 referendums across 44 municipalities and 12 states.
In China, the People’s Bank of China took a step this week to support companies’ share buybacks by lowering the relending rate designated for that purpose, according to Chosunbiz. Governor Pan Gongsheng said on Nov. 3 that the bank would work to "protect financial market stability" and prevent a systemic financial crisis. The remarks and measures come as markets in the region face pressure from the sell-off tied to technology and chip stocks. In data recorded by EL7, TSM closed at $353.1 on Nov. 5, the close on the day before the trading that saw the subsequent decline. Investors are awaiting the National Bureau of Statistics of China’s monthly Consumer Price Index report, due on Nov. 9 at 9:30 a.m. local time; the official calendar notes that its dates are preliminary and subject to change.