'Blue wave' lifts US big tech while Korean chipmakers brace for pressure

A Democratic sweep of both chambers of Congress in the US midterm elections has cleared some policy uncertainty, but the so-called blue wave is proving to be a headwind for Korean semiconductor stocks.

Chipmakers tumbled on fears of tighter data center regulation, while funds are expected to rotate into US big tech companies that stand to benefit from reduced investment pressure. Anthropic's pending initial public offering has also emerged as a wildcard for supply and demand. Analysts warn that supply-demand uncertainty could persist in a domestic market where semiconductors carry heavy index weight.

According to the financial investment industry Thursday, New York stocks surged Wednesday (local time) as election uncertainty cleared, investors anticipated congressional checks on the Donald Trump administration, and hopes grew for an early end to the Iran war. The Dow Jones Industrial Average closed up 3.03 percent at 53,356.12, while the S&P 500 and NASDAQ Composite rose 1.58 percent and 1.44 percent, respectively.

Wall Street broadly cheered the result, but domestic investors focused on the sharp divergence among individual stocks. Most big tech names rose on expectations that a slower pace of AI infrastructure investment would ease their capital burden, while data center-related stocks such as Hut 8 (down 23.2 percent) and Iren (down 11.2 percent) tumbled.

The selloff came after the Democratic Party won Texas and Georgia — states with heavy concentrations of data centers — stoking fears that construction and AI infrastructure expansion could face tighter regulation. Nvidia also fell, and the Philadelphia Semiconductor Index dropped 3.1 percent to its lowest level in six months.

For a domestic market with a heavy weighting in semiconductor stocks, the supply-demand pressure is hard to ignore. The Kospi opened Thursday down 103.71 points, or 1.82 percent, at 5,580.09 and extended its losses through the session. Semiconductor stocks, which account for a large share of Kospi market capitalization, led the decline — Samsung Electronics fell 3.33 percent, SK hynix dropped 6.02 percent, and SK Square slid 5.34 percent.

Foreign selling drove the pressure. On the Kospi market, individuals and institutions net bought 128.8 billion won ($96.1 million) and 76.9 billion won, respectively, but foreigners net sold 208.6 billion won. Foreign investors have now posted net selling for five consecutive trading sessions. The previous session alone saw foreigners net sell more than 2 trillion won in the semiconductor sector.

"The possibility that the Democratic Party's data center regulation issue will materialize remains open, but it is unlikely to take concrete shape in the short term," said Byeon Jun-ho, a researcher at IBK Investment Securities. Byeon added, however, that "because regulation could actually ease the AI investment burden on US big tech and reduce concerns, domestic and global funds may adopt a long-short strategy — selling Korean memory chips and buying US big tech — meaning supply-demand uncertainty could linger."

Anthropic's listing is also cited as a supply-demand variable. Byeon said the specific listing schedule should take shape around mid-November, starting with an IPO roadshow next week. Once a subscription schedule is set, investors may sell existing holdings to raise subscription funds, creating short-term supply-demand pressure.

A similar supply-demand disruption occurred during SpaceX's listing in June. Byeon also noted that if market demand proves weak during the listing process or falls short of the expected valuation, it could weigh again on sentiment toward AI and semiconductor investment. Although semiconductor share prices briefly spiked on news of Anthropic's listing on Oct. 26, the actual listing period could prove to be a burden rather than a catalyst.

Kang Hye-seong, a researcher at Sangsangin Investment and Securities, said it will likely take time for memory stocks — the core of the domestic market — to stage a meaningful rebound. Kang added that resolving anxiety over the AI ecosystem and capital-raising issues at hyperscalers, or large-scale cloud providers, would require waiting for Nvidia's earnings results, subsequent contract announcements, and further earnings releases.

Against this backdrop, some analysts are recommending green-energy themes as an alternative to semiconductors. "After the sharp market decline, the rebound pattern is likely to favor green-energy themes over semiconductors, given expectations that Democratic Party policies will come to the fore and the overhang from data center regulation and the Anthropic listing," Byeon said.

Byeon pointed to the fact that green-energy theme stocks — including Ecopro BM, Doosan Fuel Cell, Hanwha Solutions and CS Wind — had rebounded from key historical support levels without having priced in blue-wave expectations in advance.

Sangsangin Investment and Securities expressed optimism about strength in ESS and renewable energy, which are seen as direct beneficiaries. Han Ji-young, a researcher at Kiwoom Securities, also wrote in a report Thursday that the market would likely see a divergence between AI plays such as semiconductors and power equipment on one side, and non-AI plays including secondary batteries, solar and other renewable energy stocks on the other.

That said, calls to sell semiconductors outright remain muted. The recent selloff has pushed the Kospi's forward price-to-earnings ratio and price-to-book ratio down to 3.98 times and 1.07 times, respectively, while the semiconductor sector has fallen to 2.71 times and 1.28 times — levels that suggest a significant portion of the negative news has already been priced in.

"Volatility in AI stocks will remain elevated, but it is reasonable to assign a low probability to a repeat of the cascading sharp declines seen several times since October," Han said, adding that data center regulation is unlikely to lead to a structural contraction in the AI investment cycle.

th5@heraldcorp.com