Asian stocks plunged at the open on Friday November 6, with Japan's Nikkei 225 sliding into a technical bear market as investors dumped artificial intelligence-linked shares following a chipmaker rout on Wall Street.

Traders seemed to fear that the Democrats, who swept Congress in the US midterm elections, would push for tighter regulation of the AI industry.

The Nikkei has fallen sharply since the end of June and is now on the verge of a 20% decline from its peak, the threshold that defines a technical bear market. The gap in performance between the tech-heavy Nikkei and the broader Topix has widened more than at any point in decades, according to a Bloomberg report, hinting at how heavily the selling has focused on technology stocks.

South Korea's tech-heavy Kospi dropped 8.55% in early trade, triggering a circuit breaker. Samsung Electronics and SK Hynix each shed more than 9%. The Nikkei 225 sank 5.86%, while the MSCI Asia Pacific Index lost 2.9%.

Futures pointed to losses in Taiwan, Hong Kong and mainland China, while Hang Seng futures fell 1.6%.

Samsung, SK Hynix and Taiwan Semiconductor Manufacturing Co. took the brunt of the AI-related selloff. Hong Kong bucked the trend in part as investors rotated out of AI supply-chain stocks and into Chinese internet platforms trading at a discount, according to Bloomberg.

In India, the GIFT Nifty, which indicates how the country's stock market could open for the day's trade, hinted at a negative start, gap-down start.

The Japanese yen was little changed at 157.65 per dollar, while the offshore yuan barely moved at 6.6643 per dollar.

Wall Street set the tone for the movements as the S&P 500 plunged 4.4% on Thursday, its worst day since the April 2025 tariff meltdown. The Nasdaq 100 tumbled 6.4% and erased $2.3 trillion in market value, its steepest one-day fall since March 2020. A closely watched gauge of chip giants dropped 12%, with Nvidia, Qualcomm and Arm Holdings among the biggest losers.

Also Read: US Stock Market Crash: 15 things to know about the worst day for Wall Street in 19 months

The Philadelphia Semiconductor Index has lost almost 16% this week and is heading for its worst weekly performance since April last year. Nasdaq 100 futures edged up 0.3% on Friday, a sign that markets may be starting to stabilise.

Investors also seemed to bet that a Democratic sweep of Congress would hasten an end to the Iran war. Fears of stricter oversight of the data centre industry then overwhelmed that optimism and whipsawed global markets this week.

Texas, in particular, seemed to add to the speculation as newly elected Democratic Governor Gina Hinojosa has called for an immediate moratorium on data centre development, which Texas data centre developers see as their worst-case scenario.

Her win, together with Democratic victories in other governor's races, could expose half of the proposed AI data centre additions across the US to tougher local scrutiny and resistance.

On the economic front, US weekly jobless claims fell below all estimates, Labor Department data showed. Investors would now likely wait for Friday's US payrolls report for further clues on the path of interest rates.

Federal Reserve Bank of Cleveland President Beth Hammack said rates must stay restrictive to bring inflation back to the central bank's target, according to a Bloomberg report. She added that more frequent policy moves could lower the risk of the Fed falling behind.

Also Read: Samvat 2083: How should investors position their portfolios amid changing market trends?

Meanwhile, in commodities, oil was on course for its biggest weekly loss since April after a volatile stretch, as investors weighed the prospects of an end to the months-long war in West Asia.

Brent traded at $99.32 a barrel in early Asian trade. US crude climbed above $91 a barrel after a 2.7% jump in the previous session.

With Bloomberg Inputs