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

The KOSPI fell about 3.75% to around 5,448 intraday, while the KOSDAQ slipped about 3.8% to the 687 level. Losses widened in the afternoon, with the KOSPI down roughly 4.3% at around 5,439 and the KOSDAQ down 4.05% at around 685. Intraday selling pressure was strong enough to trigger a KOSPI sell-sidecar.

Foreign investors were net sellers in both cash equities and futures on the Korea Exchange. Their selling in cash equities exceeded KRW 2 trillion intraday and rose to around KRW 2.3 trillion in the afternoon, while net selling in futures continued at the KRW 300 billion level. Foreign investors also sold KOSDAQ shares. The won-dollar exchange rate traded around 1,343 won, up about 2 won from the previous day.

The scale of foreign selling relative to domestic trading value also amplified the market decline. With trading value below KRW 15 trillion, selling of around KRW 2 trillion left insufficient demand to absorb the supply. As foreign funds sold large-cap domestic semiconductor stocks in step with weakness in U.S. semiconductor shares, downward pressure spread across the broader market.

Initial readings on U.S. sectors diverged, citing regulatory pressure on big tech, delays to crypto-related legislation, uncertainty over defense budgets and the possibility of tighter rules for banks and credit card companies. By contrast, expectations of stronger support for the Affordable Care Act were cited as a positive for health insurers and hospital-related stocks. Despite concerns that crypto legislation could be delayed, Bitcoin recovered to $80,000, underscoring the varied responses across sectors.

Defense stocks faced concerns about cuts to military budgets, but demand remains to replenish weapons used during the war in Iran. Expanded health insurance coverage could create opportunities for hospitals, while pressure to lower drug prices could weigh on pharmaceutical and biotech companies. As the same policy changes can affect companies differently even within an industry, it is difficult to treat surface-level interpretations immediately after the election as long-term trends.

Market participants said it would take time for sector directions to become established, given how recently the election results came in. U.S. market holidays and lower trading volumes in late November, coinciding with year-end vacations for investors and analysts, could thin liquidity. For now, the priority is to reduce sharp volatility and assess employment and inflation data as well as corporate earnings.