Chip stocks slump as U.S. midterm election forecasts heighten concerns over tighter AI regulation.

As expectations grow that the Democratic Party will sweep both chambers of Congress, stock markets in Japan, South Korea, and Taiwan fell sharply, while US equity futures and the dollar both declined and US Treasuries rose. Bitcoin fell. South Korea's Kospi index and Japan's Nikkei 225 index both fell about 4%, Taiwan's weighted index also dropped more than 3%, and chip stocks plunged, as the Democrats' strong performance in the midterm elections raised investor concerns that AI regulation may tighten. US equity futures also declined, with Nasdaq 100 futures, which are heavily weighted toward tech stocks, falling more than 2%. The dollar spot index fell, heading for its worst single-day performance in two months. G10 currencies all rose against the dollar, with the Swiss franc and Japanese yen among the top performers. Major Asian currencies other than the renminbi and Taiwan dollar also rose against the dollar. The benchmark 10-year US Treasury yield fell 6 basis points to 4.90%. The political gridlock that the Democrats may bring could further limit US tax cuts and government spending, thereby easing market concerns about federal government borrowing, and US Treasuries are expected to benefit. Kalshi estimates the probability of Democrats winning the House at 99%, and the probability of winning the Senate is roughly the same, signaling that the Democrats may achieve an overwhelming victory in both chambers.