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

Concerns that data center regulation could tighten in areas where Democrats won emerged as a factor behind weakness in semiconductor stocks. Particular attention focused on victories by Democratic candidates in Texas and Georgia, where a significant share of the data centers expected to be built in the United States by 2028 are planned. The Texas governor-elect’s pledges included reviewing tax incentives and subsidies for data centers, protecting water supplies and electricity for residential use, and expanding local communities’ decision-making authority.

Some interpreted these pledges as aimed more at managing data centers’ use of power and water and their impact on local communities than at halting the AI industry. Residents are concerned that data centers’ heavy use of electricity and water could raise utility and water costs, while leaving communities to bear the burden on transmission networks and the environment. Big tech companies are responding to political demands with proposals to procure power directly and cover the related costs.

Changing state or federal laws and applying them through actual permitting procedures will take time; presidential vetoes and negotiations in Congress are also variables. Facilities already operating or under construction, as well as projects with completed contracts, would be difficult to halt in the short term. Political scrutiny could make project development more challenging, but the view that data center construction will stop immediately was described as excessive.

As weakness has persisted recently in Chinese equities, authorities have rolled out a series of support measures. These include encouraging companies to buy back their own shares and providing financing through low-interest loans to companies with insufficient funds of their own. Measures are also being pursued to help institutional investors convert long-term assets into more liquid short-term assets, increasing their capacity to buy shares.

Other proposals include curbing new IPOs, encouraging insurers to invest a set share of funds from new products in equities, and restricting share sales by company employees and executives. Chinese equities were reported to have fallen about 10% over the past month, extending a run of consecutive declines. Market pressures have mounted, with some recently listed stocks also correcting sharply from their highs.

It is uncertain whether these measures will lift share prices immediately, but the signal that authorities are responding rather than allowing the market to fall unchecked could affect investor confidence, analysts said. Similar concerns were raised in South Korea about the need for demand to absorb foreign selling and efforts to stabilize the market.