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Chipmakers and other companies linked to the artificial intelligence boom took a hammering in the days after Tuesday’s US midterms saw Democrats sweep both houses of Congress in a rebuke to Donald Trump and his Republican party.
The results suggested voters were angry at the president’s Iran war and tariffs, which have sent prices soaring, as well as a sharp kickback against the huge data centre buildout that has taken place across the country in recent years.
That has led to speculation the new Congress will seek to wind in tech firms’ construction drive, which could put thousands of jobs at risk.
The uncertainty comes with traders already nervous about when the hundreds of billions of dollars pumped into the sector would actually see a profit.
After taking a lashing on Thursday, Wall Street enjoyed a little stability at the end of last week, and Asia – which had suffered a hammering itself on Friday – largely followed suit to start this week.
Tokyo, Seoul and Taipei – which are heavily weighted with AI-linked tech giants – led the advances.
The Japanese Nikkei 225 piled on more than 3% thanks to rallies in Kioxia, Tokyo Electron and Advantest, while SK hynix and Samsung piled on around 3% to push the South Korean Kospi sharply higher.
Taiwan’s TSMC rocketed nearly 6% to drag the Taiex 5% higher.
There were also healthy gains in Hong Kong and Shanghai, though Sydney, Wellington and Manila edged down.
“Investors will be watching carefully this week to get a sense as to whether these gains are just short-covering, bargain hunting or the beginning of something more sustainable in nature,” said Sally Auld at National Australia Bank.
“Fears around AI regulation, the outlook for (capital expenditure) and free cash flow have been the driver of risk reduction in recent weeks and these issues are not likely to be resolved with any conviction in the near term.
“Nonetheless, the valuation of many tech stocks now looks less expensive.”
Investors will also be keeping tabs this week on the release of fresh US inflation data, after figures Friday showed the economy created far more jobs than expected in October.
The figures will key for the Federal Reserve in determining whether or not to hike interest rates when it meets next in December, with markets saying there is an 80% chance of a lift.
Meanwhile, investors were also keeping an eye on Nvidia updates after the US tech giant opened an independent investigation following reports its CEO Jensen Huang had a relationship with a suspected Chinese spy.
The company, one of the most valuable in the world, said its board had no reason to believe the company’s secrets or national security were compromised, adding that the CEO was committed to continuing to lead the company.