Taiwan stocks tumble 4.5% as AI regulation fears mount after US midterms

Taiwan and other Chinese-speaking markets fell sharply Friday after the Democratic Party swept both chambers of Congress in the US midterm elections, stoking fears of tighter regulation on AI and data centers.

Taiwan's Taiex index closed down 1,873.08 points, or 4.51 percent, at 39,701.64, breaking below the 40,000 mark for the first time on a closing basis.

At its worst point during the session, the index shed as many as 3,737.67 points — the largest intraday decline in the history of the Taiwan stock market. The benchmark briefly touched 37,837.05, a drop of 8.99 percent from Thursday's close.

The Taiex had climbed as high as 49,822.55 on Oct. 6, approaching the 50,000 level, before reversing course. Friday marked its seventh consecutive session of losses.

TSMC, Taiwan's largest company by market capitalization and the world's biggest contract chipmaker, also tumbled. Its share price fell more than 9 percent early in the session, nearing the daily limit-down threshold, before paring losses to close 4.69 percent lower. TSMC extended its losing streak to seven straight sessions.

The Democratic Party's capture of both the Senate and the House fueled concern that AI and data center industries could face stricter regulation, triggering a broad selloff in technology shares. NASDAQ tumbled 5.5 percent on Thursday. Selling spread across semiconductor and AI-related stocks as existing worries about whether returns on massive AI investment would prove sufficient added to the pressure.

Taiwanese President Lai Ching-te urged the public not to panic over recent financial market volatility, saying the government would closely monitor conditions and prepare stabilization measures. Markets are watching to see whether Taiwanese authorities will take additional steps to steady trading.

Mainland Chinese markets held up relatively better. The Shanghai Composite Index fell 1.10 percent, while the CSI 300 — which tracks large-cap stocks listed in Shanghai and Shenzhen — closed down 1.44 percent.

The STAR 50 index, which tracks technology-focused shares on the STAR Market, dropped 2.60 percent. CXMT, China's memory chip maker, fell 4.98 percent. Hua Hong Semiconductor, listed in Hong Kong, bucked the trend and rose 6.86 percent, boosted in part by its earnings release.

Hong Kong's Hang Seng Index also declined 1.27 percent. As risk aversion grew, investors poured money into safe-haven assets including Chinese government bonds.

Chinese authorities have been rolling out a series of capital market stabilization measures in recent days. The People's Bank of China cut rates this week on relending facilities designed to support corporate share buybacks. PBOC Governor Pan Gongsheng said Tuesday that the central bank would work to maintain stability in the stock, bond and foreign exchange markets and prevent a systemic financial crisis.