Japan’s Nikkei Enters Bear Market as AI Selloff Deepens

Japan’s Nikkei has fallen more than 20% from its June peak, entering a bear market. Seoul’s market has dropped 44% from its peak. The steep declines show how quickly investors have turned against the AI trade, even as some US technology shares began recovering Friday. The latest losses add to a week of sharp falls across global markets. ^12,10

The slide gathered pace after Democrats won control of Congress in the US midterm elections. Investors fear lawmakers and local officials could slow data center construction. These facilities are packed with computers that power AI services. That worry adds to doubts about whether companies can earn enough to justify huge spending, and whether costly loans will stall new projects. Japan’s Nikkei fell 6% Friday, its biggest one-day decline since April 2025. South Korean shares also plunged. ^1,12

That matters because Asian chipmakers and other technology suppliers have gained from demand for data center equipment. A slowdown in construction could hit those companies far beyond the United States. At the same time, voters across US political parties have raised concerns about AI and higher power bills linked to data centers. But Democrats’ control of Congress does not guarantee federal limits: President Donald Trump can veto legislation, and companies still expect growth. Friday’s bounce in Nvidia and other AI-linked shares showed investors remain divided, not that the underlying questions have gone away. ^4,10

Those questions now hang over a market that had seen AI spending as a powerful source of future growth. On Friday, Nvidia rose as US shares steadied, but Japan and South Korea’s losses mark a much deeper retreat from earlier highs. Investors will watch to see whether data center projects move ahead, face delays, or become too costly to fund. ^4,12