Taiwan Stocks Fall 3.2% and Break Below 42,000 on US AI Regulation Fears

The Taiwan Capitalization Weighted Stock Index (Taiex) ended at 41,574.72, down 1,374.19 points, according to Taiwan's Central News Agency (CNA). That was its lowest close since July 31. At its low the index was down 1,435.34 points at 41,513.57. Turnover was NT$926.02 billion. Finance, textiles, cement and rubber were the only sectors that held up relatively well.

Taiwan's market depends heavily on the companies that make the chips, servers, power systems and circuit boards inside AI data centres. That leaves it exposed to any slowdown in US capital spending on AI. CNA said worries about US data centre construction had driven a sharp fall in the Philadelphia Semiconductor Index, and that this dragged Taiwanese shares lower. Local reports tied those worries to the Democratic Party's gains in this week's US midterm elections, which investors fear could bring stricter AI regulation and closer scrutiny of compute infrastructure approvals.

In the previous US session the semiconductor index fell 3.13% to 10,268.66 and Nvidia dropped 3.17%, according to a market report on Yahoo News Taiwan. TSMC's American depositary receipts lost 2.24%. Wall Street as a whole rallied on the election result: the Dow Jones Industrial Average rose 3.03% and the S&P 500 gained 1.58%.

Taiwan Semiconductor Manufacturing Co, the index's heaviest weight, closed down NT$20 at NT$2,240, with selling picking up late in the session. Other large technology stocks fell harder. MediaTek lost NT$255 to NT$3,460. Delta Electronics, which supplies power and cooling equipment for AI servers, dropped 7.38% to NT$1,130. Hon Hai, the assembler known as Foxconn, slipped NT$5 to NT$235, a day after it reported record October sales on demand for Nvidia AI servers. Several circuit-board, thermal-management and component makers fell by the daily limit during the session.

Thursday's fall extends a sharp three-day slide. The index lost 1,612.6 points, or 3.59%, on Tuesday to close at 43,307.54. On Wednesday it fell more than 1,400 points during the session but recovered most of that to close down 358.63 points at 42,948.91. Local reports said foreign investors were heavy net sellers this week.

The sell-off was regional. CNA reported that Japan's Nikkei fell more than 1,000 points and South Korea's market dropped more than 5% as AI-related shares were sold. Hong Kong shares, which have less exposure to AI hardware, rose 877 points.

The Taiwan Stock Exchange urged investors to focus on fundamentals and make rational judgements, according to CNA, which noted the index has lost more than 8,000 points over the past month. Some local analysts said year-end window dressing and oversold technical conditions could set up a short-term rebound once the election result is absorbed. They said the direction of US AI infrastructure spending would still decide the market's next move.