[Edaily Reporter KIM YOON-JEONG ] As the South Korean stock market plummeted amid growing concerns that the “blue wave”—in which the Democratic Party secured control of both the U.S. Senate and House of Representatives in the midterm elections—would dampen investment in artificial intelligence (AI), analysts in the securities industry have repeatedly argued that these market concerns are excessive. They analyze that even if U.S. regulations on data centers are tightened, the likelihood of a significant decline in investment is low, given the competition with China for AI supremacy.
Nevertheless, given the ongoing selling pressure from foreign investors, hedge fund liquidations, and supply-demand pressures stemming from Anthropic’s initial public offering (IPO), cautious views suggesting it is difficult to expect a V-shaped rebound in the short term have gained traction. The outlook is that the stock market will gradually recover as uncertainties—such as the future direction of data center regulations and the profitability of AI investments—are resolved one by one.

According to MP Doctor on the 6th, the KOSPI plunged more than 8% early in the session, falling below the 5,000 mark. Around 9:03 a.m., the first-stage circuit breaker was triggered, suspending trading for 20 minutes, and immediately after trading resumed, the sell-side sidecar was also activated. The KOSPI fell as low as 4,911.28 during the session but narrowed its losses, recovering the 5,000 mark, thanks to buying by institutional investors.
As of 2:31 p.m., the KOSPI stood at 5,107.31, down 273.88 points (5.14%) from the previous trading day. Foreign investors recorded net sales of 2.0954 trillion won, while retail investors and institutions posted net purchases of 335.8 billion won and 1.3437 trillion won, respectively.
This sharp decline is attributed to growing concerns that regulations on data center construction could tighten following the U.S. Democratic Party’s victory in the midterm elections. Overnight, the U.S. Nasdaq Index fell more than 5% and the Philadelphia Semiconductor Index plummeted more than 12%, triggering a wave of selling centered on domestic semiconductor stocks.
◇Supply-Demand Shock Amid Data Center Regulation Fears… AI Investment Anxiety Spreads
Research heads at securities firms pointed to concerns over tighter data center regulations by the U.S. Democratic Party and the outflow of investment funds that had been concentrated in AI-related stocks as the causes of this sharp decline.
Yoon Seok-mo, head of the Research Center at Samsung Securities, analyzed that concerns have grown that licensing procedures for related projects could become more stringent as the Democratic Party gains control of state governments in regions where data center construction is concentrated. “Even if legislation that actually restricts construction is unlikely to pass immediately, market participants are concerned that permitting procedures—such as public hearings with residents—will become more stringent than before,” Yoon explained. “Such schedule delays could not only incur additional costs but also increase the financial burden.”
Yang Ji-hwan, Head of the Research Center at Daishin Securities, analyzed, “As regulatory risks surrounding data center construction came into focus due to the Democratic ‘blue wave’ in the U.S. midterm elections, a sell-off occurred in the South Korean market, a key beneficiary of the AI value chain.” He continued, “The stocks that fell the most in the U.S. market were primarily those of companies supplying memory and equipment, rather than those building data centers,” explaining, “In South Korea, where the semiconductor sector—including Samsung Electronics and SK Hynix—accounts for a large portion of the market, related beneficiary sectors such as power equipment also experienced a concurrent correction.”
Yoon Chang-yong, Head of Research at Shinhan Investment Securities, assessed, “The market’s focus is shifting from the feasibility of raising funds to whether invested facilities can be operated as scheduled and generate sufficient profits,” adding, “Delays or cancellations of some projects have fueled doubts about overinvestment and profit outlooks, causing both a delay in profit realization and a rise in the risk premium to simultaneously put pressure on stock prices.”
Some analysts also noted that it is difficult to attribute this sharp decline solely to the results of the U.S. midterm elections. They explained that selling pressure intensified as political uncertainty compounded existing concerns regarding the profitability and sustainability of investment in the AI industry.
Lee Jin-woo, Head of the Research Center at Meritz Securities, said, “While the U.S. midterm elections have had some impact on stock market trends in recent days, it is difficult to view this stock price decline as the result of a single event.” He added, “Even after the Big Tech earnings announcements, market skepticism regarding the AI industry was not fully resolved, and with the midterm election results compounding this, it appears that market liquidity has become strained.” He added, “Ultimately, this is the result of accumulated sources of anxiety leading investors to liquidate their positions.”
◇“Unlikely that AI investment itself will slow down”…Assessment of an Excessive Drop
Among securities analysts, the prevailing view was that concerns over tighter data center regulations leading to a reduction in investment across the entire AI industry were exaggerated. Analysts note that since even the U.S. Democratic Party agrees on the need to secure an advantage in the AI technology competition with China, the likelihood of a blanket ban on data center construction is low.
Center Director Lee Jin-woo said, “Market concerns that data center investment could be delayed due to Democratic Party policies are exaggerated,” adding, “Investment in AI data centers stems from competition between nations and among private companies. A realistic interpretation is that companies will seek alternatives rather than having the investment cycle of the entire industry halted by a single party’s policies.” He continued, “While there may be some refinements or adjustments, this does not mean the direction of investment itself will change.”
Cho Su-hong, Head of Research at NH Investment & Securities, remarked, “Since the Democratic Party also supports the competition for AI supremacy with China, there is limited incentive to completely block the construction of data centers, which form the foundation of AI development.” He added, “Even if construction in the U.S. is delayed, it will still be possible to secure computing power by utilizing data centers in allied nations, so memory demand is expected to remain steady.”
Yang Ji-hwan, Center Director, said, “The hegemonic struggle between the U.S. and China to gain the upper hand in areas such as energy, AI, and military power will continue.” He added, “We assume as our base scenario that the total volume of AI-related investment will not change significantly, while the pace of investment will moderate; in this case, we judge that the recent downward correction in the Korean market is excessive.”
Center Director Park Yeon-ju also remarked, “AI investment is central to Big Tech’s competitiveness, and given the race for leadership with China, there is little disagreement between the ruling and opposition parties; therefore, I believe it is unlikely that data center investment will be significantly curtailed even if regulations are tightened.”
Center Director Yoon Seok-mo predicted, “Considering that, unlike past sharp sell-offs, there are no cracks appearing within the financial system, and that global macroeconomic indicators—including South Korea’s strong export performance—remain robust, the market reaction will eventually converge back toward fundamental logic.”
Analysts also concluded that the decline is excessive when corporate earnings are compared to current stock prices. Lee Jin-woo, Head of the Research Center, said, “For the current stock price levels in the domestic market to be justified, there would need to be a crisis in the real economy—not just a simple deterioration in earnings.” He added, “Unless concerns over data center investment lead to a scenario involving an economic recession or a debt crisis, I believe the current stock price decline is excessive.”
He continued, “The price-to-book ratio (PBR) for Samsung Electronics and SK Hynix has now fallen to around 1.1 times. This is a valuation level that was observed even when the semiconductor industry was a typical cyclical sector and market conditions were near the bottom,” explaining, “The overall KOSPI PBR is also below 1 times.”
Center Director Park Yeon-ju also assessed that, given corporate profitability, the KOSPI is currently significantly undervalued compared to major global stock markets.
◇“It’s Too Early to Declare a Bottom”… Foreign Selling and Hedge Fund Liquidations as Variables
Despite assessments that the stock price decline has been excessive, cautious views have been raised that supply-and-demand instability may persist in the short term.
Hwang Seung-taek, Head of the Research Center at Hana Securities, stated, “While the appeal of undervaluation has increased, regulatory uncertainty and supply-demand instability remain, so we must leave open the possibility of further short-term declines.” He added, “Coupled with news of hedge funds liquidating their AI-related positions, I expect increased volatility due to deleveraging to continue for the time being.”
He continued, “The government’s decision to exempt securities firms from the requirement to maintain a 140% margin collateral ratio for three months starting November 9 will help alleviate the downward pressure caused by forced liquidations,” but added, “We need to keep a close eye on downside risks such as delays in data center permits and construction starts, funding pressures for Big Tech companies, and delays in reaching a U.S. budget agreement.”
Center Director Yang Ji-hwan stated, “It is difficult to say that supply-and-demand-related threats—such as stop-loss selling and fund liquidations by hedge funds with high exposure to the AI value chain—have been resolved yet,” adding, “While it is hard to say that today marks the bottom of the index, excluding supply-and-demand factors, I believe the index has entered an oversold zone.”
Yoon Chang-yong, Head of the Division, emphasized the need to confirm whether foreign selling pressure is subsiding. As of the previous day, foreign investors had recorded net sales of approximately 22 trillion won in domestic stocks over the past 20 trading days, with net sales over the last five trading days alone totaling about 9.3 trillion won.
Yoon explained, “A genuine sign of stability would be a combination of a recent decline in the scale of selling and the index holding its low despite additional negative factors,” noting that even if the cumulative net selling by foreign investors improves, it is important to distinguish whether actual new selling is decreasing.
Yoo Jong-woo, Head of Research at Korea Investment & Securities, assessed, “Election uncertainty has been resolved following President Trump’s concession,” adding, “Foreign capital is leaning slightly toward selling due to the Anthropic IPO rather than the election.”
Supply-and-demand pressures stemming from Anthropic’s IPO were also cited as a key variable. Anthropic is set to begin its official roadshow next week and aims to list on the Nasdaq before the U.S. Thanksgiving holiday on the 26th. With an offering size of approximately $100 billion, it is projected to surpass SpaceX’s $75 billion IPO in June to become the largest IPO in history. Its enterprise value is estimated to be between $1.5 trillion and $2 trillion.
Division Head Cho Su-hong stated, “This could put pressure on the supply and demand of domestic semiconductor stocks amid the global reallocation of capital,” but added, “Since foreign investors switched to net buying on the day of SpaceX’s IPO, the supply-demand pressure is expected to ease once the IPO schedule is finalized.”
◇ Regulatory Direction and AI Profitability Key… Securities Industry Advises “Wait-and-See Rather Than Panic Selling”
The consensus is that, rather than expecting a sharp short-term rebound in the stock market, investors should wait to see whether supply-demand instability and policy uncertainty are resolved.
Park Yeon-ju, the center director, said, “For the market to recover, it is crucial to confirm the direction of U.S. data center regulations and see supply-demand pressures stabilize, while the sustainability of AI investments is reaffirmed through Big Tech’s monetization of AI and the rapid revenue growth of AI service providers.”
She added, “While short-term volatility may persist until supply-and-demand factors ease, we view current stock prices as being in an undershooting phase (where the market is trading below its fair value).”
Center Director Lee Jin-woo said, “Rather than a short-term V-shaped rebound, the market is likely to undergo a process of assessing various factors over the next few weeks,” adding, “Through Anthropic’s IPO, we will see to what extent the market recognizes the growth potential of companies representing the AI industry and what level of valuation premium it assigns to them.”
Yoon Chang-yong, Head of the Division, pointed out, “Factors that could trigger an upward trend going forward include the easing of uncertainty as licensing conditions are clarified and the end of forced selling.” He added, “Additional downside risks include downward revisions to profit and book value forecasts due to shipment delays and price renegotiations, as well as the spread of credit concerns surrounding NeoCloud.”
Movements in international oil prices and U.S. Treasury yields were also cited as variables. Yoon Seok-mo, Center Director, analyzed, “Oil prices have fallen sharply from their highs due to expectations of recent changes in the Middle East situation, and the corresponding decline in market interest rates could also significantly reduce the financial burden associated with AI.”
Regarding investment strategy, many opinions suggested that investors should wait to see how market uncertainty eases rather than joining the panic selling.
Center Director Yoon advised, “Rather than joining the panic selling right away, it is necessary to adopt a wait-and-see attitude until the market noise subsides.”
Yang Ji-hwan, Head of the Research Center, stated, “At this point, the appropriate response is a wait-and-see strategy rather than joining the sell-off; for investors with cash on hand, it is best to proceed with cautious, phased purchases.”
Yoon Chang-yong, Head of the Research Division, emphasized, “At this stage, rather than aggressively increasing positions based solely on undervaluation, we should prioritize managing leverage and liquidity burdens and moderating the pace of new purchases.”