U.S. Midterms Seen as Limited Risk for Korean Chip Stocks

By Nathan Brooks

South Korea’s KOSPI has averaged returns of 2.9% over three months and 10.9% over six months after U.S. midterm elections since 1975, according to Hyundai Motor Securities. The brokerage expects a possible Democratic sweep on Nov. 3 to leave South Korean chip and equipment shares comparatively insulated, while solar and energy storage systems take the clearest benefit.

Foreign investors may not return in force until mid-to-late November, and the broader market rebound may not begin until after mid-November, so the historical average offers context rather than a calendar. The brokerage expects volatility through early November.

At a briefing at the Korea Exchange in Yeouido, Seoul, on the 27th, researcher Kim Jae-seung advised waiting for the Nov. 3 election and major IPOs to clarify external variables before setting strategy. He attributes foreign selling to U.S. political and economic uncertainty, although odds of a Democratic House-Senate sweep have risen; predicting the Senate remains difficult.

What changes for Korean semiconductors?

Hyundai Motor Securities expects a Democratic House-Senate sweep to have limited impact on South Korean semiconductor shares and the materials, parts and equipment sector. Its thesis is geographic, not a claim that AI spending faces no policy risk.

The brokerage also cites continued sovereign AI investment in Europe and Asia. Kim said: “AI data centers may be delayed inside the U.S., but they are not being delayed outside the U.S.” Global Big Tech companies are more likely to expand investment outside the United States than cut AI spending, he said.

For chip suppliers, the question is where data centers get built, not whether AI capital spending vanishes. That is an investment outlook, not a promise about shipments or pricing.

A separate risk sits with power equipment. Tighter regulation and oversight of Big Tech could weigh on related shares in the short term; data-center electricity demand and water access could prompt stricter U.S. rules. Construction delays would hurt South Korean power-equipment makers with heavy U.S. exposure.

Why solar and ESS lead?

The brokerage identifies green energy and energy storage systems (ESS) as the sectors most likely to rebound if Democrats control both chambers. Democrats have stated they would restore Inflation Reduction Act clean-energy credits that President Trump scaled back, simplify permitting, and expand transmission grids and ESS. Solar and secondary batteries rank as the leading short-term beneficiaries.

That makes the opportunity plausible, not instant. Actual policy changes would take time even if Democrats control Congress.

How could a blue wave change financial conditions?

Choi Jae-min argued that a blue wave would reduce the risk of the Trump administration unilaterally expanding tax cuts or fiscal spending. It could ease inflation and further rate-hike pressure, while reducing upward pressure on rates, the dollar and oil prices, which the brokerage views as favorable for South Korean financial conditions.

A sharp fiscal spending cut also looks unlikely. Republicans demand higher defense spending, while Democrats want to restore Obamacare and Medicare subsidies. Even a congressional victory would not remove President Donald Trump’s veto power or his relatively strong authority over tariffs, foreign policy and security.

Choi offered a warning on timing: “Looking at the 2024 case, the strength in beneficiary stocks did not last more than a month, so this year’s midterm winners and losers should be approached with a short-term view.” The 2024 precedent argues for a short trade, not a permanent policy thesis.

What should investors watch before November?

Hyundai Motor Securities advises confirming election results in early November rather than rushing into an October rebound. Seasonality usually favors an October recovery after a weak September, but policy uncertainty makes old patterns less reliable. The brokerage attributes September weakness to supply-demand and event concentration rather than damaged fundamentals, and frames it as a buying opportunity before a possible year-end rally.

Anthropic filed a registration statement with the U.S. Securities and Exchange Commission on the 26th local time, putting the AI company on the path to an IPO. Kim said global funds might sell existing holdings to raise cash for the new shares. He also predicts that an Anthropic listing could trigger a revaluation of AI-themed stocks.

SpaceX’s listing, expected in mid-November, adds another supply-demand variable. Large funds could reallocate toward the offering and sell existing market leaders to finance it. These two potential offerings could disturb positions even if the election eventually sends a clearer signal.

Which other sectors face a different cycle?

Defense stocks may face short-term pressure if Democrats push back against higher defense spending. The brokerage nevertheless sees solid fundamentals from long-term diplomatic and security demand. Shipbuilding investors should focus on the industry’s own cycle and earnings, including U.S. policies to rebuild the domestic shipbuilding sector.

Hyundai Motor Securities frames the outlook as a broad review of how U.S. political change could alter South Korean sector demand and fund flows. Volatility may persist until early November, when the election and major offerings cluster.

A year-end rally still depends on foreign buying returning after the November event cluster. For chip suppliers, the competitive variable is where AI infrastructure spending lands, not whether it continues; for solar and storage, the 2024 precedent suggests a window measured in weeks rather than a durable reset.