[Edaily Reporter KIM JUNG YOU ] Japan’s Nikkei 225 Index (Nikkei Stock Average) recorded its third-largest single-day decline in history (based on the index). This was driven by widespread concerns that data center construction would slow following the landslide victory of the Democratic Party—which has been proactive in regulating artificial intelligence (AI)—in the U.S. midterm elections. A wave of panic selling, centered on AI and semiconductor stocks, has triggered a simultaneous sharp decline in global stock markets.

According to the Tokyo Stock Exchange on the 6th, the Nikkei 225 index closed at 57,434.77, down 3,643.13 (5.96%) from the previous trading day. In terms of single-day declines, this ranks behind only August 5, 2024 (4,451), when fears of “yen carry trade” unwinding swept the market, and October 20, 1987 (3,836),(the event on October 19, 1987, when the U.S. stock market plummeted more than 20% in a single day), making it the third-largest single-day drop in history. The index fell for five consecutive trading days, dropping as low as the 56,000 level at one point during the session, and closed below the 60,000 mark for the first time in about six months.

The shock of the global stock market plunge appears to have fully spread to the Tokyo market. On the 5th, the Philadelphia Semiconductor Index—composed of major semiconductor stocks—plummeted 12.24% on U.S. markets. On the 6th, selling pressure continued in Asian markets as well; South Korea’s KOSPI, which has a high concentration of semiconductor stocks, saw its losses exceed 8% at one point, triggering a circuit breaker. Taiwan’s Weighted Index also plunged.

The decline was widespread. On the Tokyo Stock Exchange’s Prime Market, falling stocks accounted for 98% of the total. AI and semiconductor stocks, including Advantest, SoftBank Group, and Kioxia Holdings, plummeted across the board. The decline was particularly pronounced among so-called “AI infrastructure stocks,” which supply components essential for building AI infrastructure. Fujikura, which at one point plunged 20%, turned negative compared to the start of the year, giving back most of its gains from the first half of the year. Selling pressure also spread to non-AI stocks, such as Toyota Motor, which had surged the previous day.

The market is interpreting this election as a “vote of no confidence” in AI by voters. Hiroshi Namioka, chief strategist at T&D Asset Management, told the Nikkei: “Opposition and resistance to the spread of AI are akin to a modern-day ‘Luddite movement,’” adding, “These midterm elections represent the people saying ‘No’ to AI through their votes.” This is seen as the result of growing opposition to the construction of data centers—which consume massive amounts of electricity and water—in addition to concerns over job losses among white-collar workers and creators. The Democratic Party also secured consecutive victories in gubernatorial elections in states like Texas and Ohio, where data center construction is concentrated.

Uncertainty surrounding Anthropic’s initial public offering (IPO) schedule also dampened investor sentiment. Reuters reported regarding Anthropic’s IPO, scheduled for late this month, that “investors are raising questions about whether the roadshow—scheduled for next week—will actually take place.” Concerns about a possible delay in the listing reportedly spread throughout the market.

The onset of a bear market has also become a reality. The Nikkei Index hit an all-time high of 72,366 on June 25. The closing price that day fell approximately 450 points below the 20% decline threshold (57,893) from its peak, indicating that the market has entered a technical bear market. Tetsuro Ii, president of Commons Investment Trust, said, “We have been increasing our cash allocation by selling some of the AI and semiconductor stocks we’ve held since last month,” adding, “We believe the selling climax is still a little ways off, so we plan to manage our portfolio cautiously.”