Nikkei analysis: Tokyo Prime Market loses 663 trillion won; Goldman Sachs vice president says sharp rebound unlikely

[Yonhap]
[Yonhap]

A sell-off in AI-related stocks triggered by the Republican Party's defeat in the US midterm elections wiped $3.5 trillion off global market capitalization in a single day, according to an analysis by Japan's Nikkei. The rout — dubbed the "blue wave shock" — stemmed from fears that the Democratic Party would move to tighten regulation of the AI industry.

Citing data from global financial analytics platforms Quick and FactSet, the Nikkei reported Saturday that total global equity market cap stood at $154 trillion as of Thursday, down $3.5 trillion from the previous day. On Friday, an additional 77 trillion yen evaporated from the Tokyo Stock Exchange's Prime Market.

All three major New York stock indexes tumbled Thursday (local time), led by AI and technology shares. The combined market cap of NASDAQ-listed stocks fell by about $2.5 trillion — the largest single-day decline in history.

Stock markets across Greater China, including Taiwan, also tumbled Friday. Taiwan's benchmark index plunged 3,736.67 points, or 8.99 percent, immediately after the open — the largest intraday drop in the market's history.

TSMC, the world's largest semiconductor foundry and Taiwan's biggest company by market cap, fell nearly to its daily limit, dropping as much as 9.82 percent at the open, extending its losing streak to seven consecutive trading sessions.

Samsung Electronics and SK hynix, the two heavyweights of the South Korean market, both tumbled Friday. The Kospi's total market cap has fallen more than 3,000 trillion won from its peak.

Since OpenAI's ChatGPT was released in November 2022, sparking a global AI development boom, total global market capitalization had grown 1.6 times over. The midterm election results, however, have deepened concerns that the Democratic Party will impose stricter regulation on data centers.

"We are in a situation where it is hard to expect the kind of catalyst that would trigger a sharp rebound, as we saw in past market downturns, and a mood of resignation is effectively spreading among investors," said Takayuki Ishibashi, a vice president at Goldman Sachs Securities.

New York stocks rebounded Friday (local time), however, as bargain hunters moved in following Thursday's sharp losses. The NASDAQ Composite, which is heavily weighted toward technology stocks, rose 264.43 points, or 1.09 percent, to close at 24,579.42. The S&P 500 gained 23.13 points, or 0.31 percent, to finish at 7,376.86. The Dow Jones Industrial Average fell 237.33 points, or 0.46 percent, to end at 51,285.73.


cook@heraldcorp.com