[The AI Sell-Off Triggered by the Election]

As American voters voted against data center expansion in the midterm elections, global AI-related assets are tumbling once again. However, the party suffering the deepest wounds from this shock is not the United States, but China. Chinese AI and semiconductor stocks collapsed earlier and much more severely than their U.S. counterparts. The Shanghai STAR 50 Index dropped 40% in less than four months, wiping out approximately $480 billion in market capitalization. Chinese securities regulators eventually stepped in, directing a slowdown in the pace of initial public offerings (IPOs) for semiconductor and AI firms. As a direct consequence, the 33-billion-yuan (approximately $4.9 billion) IPO of Yangtze Memory Technologies Corp (YMTC), China's top NAND flash memory maker, has come to a standstill. Beijing had planned to channel household savings through the stock market to finance semiconductor self-reliance and its AI ascent. That blueprint's very foundation is now rattling.

Bloomberg News reported on the 6th that "U.S. equities are enduring their worst week since April 2025 due to an AI-related sell-off, with the shock waves spreading globally," noting that "concerns over AI industry regulations wiped roughly $3 trillion off the S&P 500 index's market cap the previous day, and while U.S. index futures struggled for direction afterward, the selling pressure swiftly spilled over into other regions." According to Bloomberg, Asian benchmark equities plummeted nearly 4%, while Europe's Stoxx 600 index slipped 1.4%. Bloomberg also noted that "while investors initially hoped that Democratic control of Congress might expedite an end to the war in Iran, escalating anxieties over tighter data center curbs overwhelmed that early optimism."

The initial spark for this sell-off originated in U.S. politics. When Democrats virtually swept congressional and gubernatorial races in the midterm elections, the market initially breathed a sigh of relief on expectations that the results were uncontested and executive branch oversight would tighten. Crude oil prices, which had spiked to $118 per barrel late last month, retreated below $100. Yet this relief vanished in just one day. Ballot measures delaying or capping data center construction went to the vote across several states, and voters almost universally voted against Big Tech. According to market intelligence firm Cleanview, roughly 40% of planned data center capacity in the United States is concentrated in states where incoming governors campaigned on halting or pausing construction.

The brunt of the damage was concentrated in tech stocks. According to Bloomberg, on November 5 (local time), the Nasdaq Composite plunged 5%, registering its sharpest single-day drop in 19 months, while the Nasdaq 100 dropped 6.4%. The Philadelphia Semiconductor Index lost nearly 16% from Monday through the week. The memory chip segment was battered especially hard: SanDisk tumbled 22%, and Micron plunged 17% on the day. CoreWeave, an AI infrastructure specialist, dropped 10%, extending its cumulative decline to 70% from its peak in May.

Trevor Greetham, Head of Multi-Asset at Royal London Asset Management, remarked, "At these valuation levels, AI investment is like a shark that has to keep swimming to survive." If investment halts, the entire stretched valuation structure fails to hold. The Bank for International Settlements (BIS) pointed out that roughly 29% of investment transactions in AI companies are targeted at other AI firms, and more than half of the incoming capital into AI firms originates from within the AI sector itself. In times of crisis, this type of circular financing can swiftly turn into an amplifier of losses.

[China's AI Bubble Has Already Burst]

While American investors are still debating whether "this is the real crash," that question has already been answered across Chinese markets. In an analytical report published on the 26th of last month, Reuters reported that "the STAR 50 Index, packed with China's marquee AI and semiconductor names, sank 40% in less than four months, vaporizing nearly $480 billion in market value." The blue-chip CSI 300 Index dropped 8.5% across October, marking its worst monthly performance since January 2016. The CSI Artificial Intelligence Index, which tracks major Chinese AI players, has plunged nearly 40% from its June peak. The downturn was spearheaded by state-backed chipmakers such as Cambricon, often dubbed the "Nvidia of China."

What makes this crash vastly more perilous for the broader Chinese economy is its sheer reliance on the AI sector. According to Goldman Sachs, AI-related equities account for 42% of combined market capitalization and 57% of daily trading turnover across mainland China and Hong Kong exchanges. When the AI segment wavers, the entire market shakes with it. The listing frenzy for new offerings has also rapidly deflated. According to Nikkei Asia, out of 14 companies that went public since September, 9 closed their debut sessions trading below their IPO offer prices. This stands in stark contrast to just months ago, when humanoid robotics maker Unitree attracted demand that exceeded its retail allotment by more than 8,000 times.

Kazuki Sawamura, a strategist at Tokyo Shinkin Asset Management, commented, "At this stage, it is difficult to determine whether the rally in AI-related shares has come to an end. The critical factor is whether the pullback remains confined to souring investor sentiment or eventually translates into deteriorating corporate earnings." For China, this question carries far more weight, given that anticipated earnings for Chinese AI firms have relied heavily on capital expenditure from U.S. Big Tech and a global shortage of memory chips.

[YMTC IPO Put on Hold: Cracks Form in the Funding Lifeline for 'Semiconductor Self-Reliance']

Reuters reported on the 4th that "Changjiang Chunqiu Holdings (CCSH), the parent company of YMTC, issued an internal notice to employees stating that it is temporarily suspending its Shanghai listing process." CCSH submitted its IPO application to the STAR Market in August, targeting an allocation of shares to strategic investors between late October and early November. Observers on the ground project that the listing could be postponed to the first half of next year. Reuters further highlighted that "the China Securities Regulatory Commission (CSRC) recently issued informal guidance to investment banks directing them to slow the pace of semiconductor and AI IPOs," aiming to "prevent fresh equity supply from further weighing down the market."

The YMTC listing is far more than routine corporate fundraising. Valued at 33 billion yuan, this proposed offering ranks as the third largest in STAR Market history, trailing only CXMT and SMIC. Its post-listing market capitalization was projected to reach between 275 billion and 330 billion yuan (roughly 56 trillion to 67 trillion won). According to the prospectus, CCSH planned to allocate 20.8 billion yuan (roughly 4.2 trillion won) toward upgrading existing production lines to next-generation 3D NAND and 12.2 billion yuan (roughly 2.5 trillion won) toward research and development. With the listing deferred, substantial uncertainty clouds both capacity expansion timelines and next-generation technology roadmaps.

Founded in 2016 jointly by Tsinghua Unigroup, the Hubei provincial government, and the National Integrated Circuit Industry Investment Fund (the "Big Fund"), YMTC is effectively a state project. The U.S. Department of Commerce placed the firm on its Entity List of export controls in October 2022. With access to U.S. semiconductor manufacturing equipment cut off, the domestic capital market served as Beijing's primary funding channel. Recently, YMTC's earnings surged on the back of an AI-driven memory shortage. Last year, CCSH posted 63.2 billion yuan (around 12 trillion won) in revenue and a net profit of 14.2 billion yuan (around 2.9 trillion won). In the first quarter of this year, its net profit reached 33.3 billion yuan (around 6.8 trillion won), surpassing double its entire prior-year annual profit in just three months. YMTC emerged as a formidable challenger threatening the positions of Samsung Electronics and SK Hynix in the Chinese NAND market.

[Channeling Household Savings into AI: Beijing's 'Slow Bull' Vision Derailed]

The current sell-off deals a direct blow to the Xi Jinping leadership's financial strategy. Reuters analyzed that "this decline has disrupted Beijing's efforts to steer household savings into the stock market to bankroll the AI boom and engineer a steady, upward-trending 'slow bull' market." In the wake of the real estate crash, Chinese authorities have sought to redirect vast household savings into equities tied to "strategic national industries," with the STAR Market serving as the designated pipeline. Yet because capital channeled through this conduit became trapped at market peaks, authorities have found themselves forced to suppress new listings altogether.

Hong Hao of Lotus Asset Management told Reuters that "this downturn will stall the plans of many companies actively preparing to go public." With high overseas borrowing costs, Chinese AI enterprises that leaned on equity offerings rather than corporate bonds have few viable alternatives. Timelines for DeepSeek and Moonshot AI, both reportedly pursuing Shanghai and Hong Kong listings, could also face disruption. Chinese authorities previously intervened to curb new listings in August 2023 to shore up secondary markets.

[Why Times Insight: The Weak Link of 'State-Driven AI Capitalism' Laid Bare]

China's AI and semiconductor strategy has rested on three core pillars: state capital providing seed investments, the STAR Market marshaling private and household wealth, and booming global AI demand sustaining real earnings. The current predicament exposes how all three pillars can crumble at once. As the stock market turned south, authorities froze listings to maintain market stability, inadvertently cutting off the capital lifeline of priority strategic industries. The dual objectives of market stabilization and industrial incubation have run into direct contradiction, revealing how an intensely top-down, engineered market turns brittle and rigid in the face of external shocks.

The greater risk looms from the United States. If U.S. data center restrictions decelerate Big Tech's capital expenditures, the memory supply shortages that bolstered profits for YMTC and CXMT this year could ease far sooner than projected. In that scenario, the explosive financial performance of Chinese memory manufacturers could be exposed as a cyclical windfall rather than sustainable operational strength. Because capital markets, earnings, and tech R&D investments are tightly intertwined, a stumble in one area risks triggering a cascading collapse across the rest.

For South Korea, the development sends mixed signals. Over the short term, the U.S.-led sell-off in memory equities puts pressure on Samsung Electronics and SK Hynix as well. Conversely, if capacity expansions and technology investments by Chinese memory makers are delayed, the fierce pressure chasing Korean chipmakers in the NAND segment could temporarily ease. Ultimately, whether this market slide marks a fleeting pause in sentiment or translates into a tangible delay in China's timeline for semiconductor self-reliance will hinge on the timing of YMTC's resumed listing and prospective policy shifts by the CSRC.