US stocks and Taiwan's market both got hit hard after midterm election results raised fears that new Democratic state leaders could block data center construction, putting Taiwan's AI supply chain at risk.

• Newly elected Democratic governors in Texas, Ohio, and Georgia are seen as opposed to building new data centers, which could threaten TSMC's expansion plans, including its Texas facility.
• US markets dropped sharply on the news, with the Dow, S&P 500, and Nasdaq all falling hard, and Taiwan's stock market followed, breaking below the 40,000 point level.
• Taiwan's market has now fallen over 16% from its record high, triggering margin calls and panic selling.
• Despite the selloff, some analysts stayed bullish, buying more TSMC shares on the dip and arguing the fundamentals remain strong with earnings outperforming past cycles.
• Big banks are split: Goldman Sachs warned the rally is dangerously concentrated in a few AI and chip giants, while Deutsche Bank upgraded US tech stocks, calling the recent selloff overdone and a buying opportunity.

Outlook: Markets are likely to stay volatile in the near term as investors watch whether the new state governments actually follow through on blocking data center projects, with TSMC's Texas plans a key signal to watch.