KOSPI Plunges on Data Center Concerns After Midterm Elections as Debate Over AI Chip Demand Widens

Stocks linked to semiconductors, AI hardware and power equipment weakened as concerns grew that data center construction could be delayed or regulated following the U.S. midterm elections. Major U.S. indices, including the S&P 500 and Nasdaq, rose, but the Philadelphia Semiconductor Index fell. Google gained more than 3%, while Microsoft and Amazon rose more than 6%; Micron Technology, by contrast, fell more than 7%.

The negative market thesis is that delays to data center investment would reduce capital spending by big tech companies and weaken semiconductor demand. A counterargument is that lower data center investment could increase utilization and profitability at existing facilities and improve big tech companies’ cash flows. AI hardware stocks came under pressure as concerns surfaced simultaneously over financing for companies building data centers and potential political constraints on future construction.

Some countered that demand already secured and construction schedules would not disappear in the short term. Among data center development plans concentrated in Texas, operational facilities, projects under construction and contracted capacity would be difficult to reverse; including projects at an early stage, a substantial amount of capacity is already in progress. Persistent shortages of power, chips and water were also cited as constraints, making it difficult to expand data centers immediately even when permits are granted.

In the domestic market, cosmetics stocks performed relatively well as semiconductor shares plunged. Gains in U.S. consumer goods, cosmetics and retail stocks—driven by expectations that easing inflationary pressure after the U.S. midterm elections would support consumption—carried over to South Korea. Rising K-beauty exports and sales events such as Amazon’s Black Friday and China’s Singles’ Day on November 11 were also cited as areas of interest.

Earnings and share-price performance in the cosmetics sector vary by company. Exchange rates and initial costs of overseas expansion are weighing on profitability, and some major companies have reported results below expectations. By contrast, growing sales volumes for brands are positive for cosmetics ODM and OEM companies. Even if export momentum holds, it is important to distinguish that generating actual profits from overseas operations may take time.

Solar, secondary batteries and energy storage systems (ESS) took a breather after surging in the previous session on expectations of a Democratic victory. The market continued to anticipate policy support for clean energy industries, but trading in each sector shifted from day to day. Institutional flows rotated among defense, secondary batteries, cosmetics and entertainment, resulting in a market characterized by strong sector rotation and few clear medium-term leaders.