US Data Center Regulation Fears Threaten South Korea's 2.9% Growth Forecast Concerns over regulation of artificial intelligence (AI) data center construction, which surfaced after the Democratic Party's victory in the US midterm elections, have emerged as a new variable in the growth path of South Korea's economy next year. For South Korea, where dependence on semiconductor exports approaches 50%, analysts say growth forecasts could waver depending on the actual severity of the regulations. According to the financial investment industry, the KOSPI index plunged nearly 11% over the two trading sessions following the midterm elections. The index, which had closed at 5,683.80, fell successively to 5,383.80 and 5,059.69. Over the same period, Samsung Electronics shares dropped more than 13%, breaking below the 200,000 won (approximately $150) mark, while SK Hynix fell nearly 19% to around 1.13 million won (approximately $830). An analysis suggesting that more than 40% of data center projects across the United States could be affected fueled the selloff. The concern is what happens if this fear spreads to the real economy. The Bank of Korea estimates that semiconductors accounted for about half of this year's growth. In October, semiconductors made up 49.0% of exports. In the industrial activity index, production excluding semiconductors grew only 1.0% on average year-on-year from January to September, far below the 2.7% increase in overall industrial production. This means semiconductors are effectively a "single wing" propping up growth. Kim Kwang-suk, head of the economic research division at the Korea Economic and Industrial Research Institute, said, "If a policy agenda to block data center construction begins to be decided in Congress, the pace of construction will slow, and as a result, total semiconductor demand will decline, inevitably pushing prices down." He added, however, that the near-term impact may be limited as Samsung Electronics and SK Hynix have recently been expanding long-term supply agreements (LTAs). There is also considerable cautious opinion that the regulations will not materialize. Yang Jun-suk, a professor of economics at the Catholic University of Korea, said, "Looking at the fear currently in the stock market, there is no substance to it," adding, "Strong regulations that would block the AI boom will not be introduced." He explained that the Democratic Party, having become the majority party in Congress on the back of President Donald Trump's opposing stance, is in a position where it must maintain better growth than Trump. Kim Mi-ru, head of the economic outlook office at the Korea Development Institute (KDI), noted, "It is difficult to touch construction already underway that will proceed and be completed next year," adding, "The problem is the year after next." Indeed, among the 36 states that held midterm elections, gubernatorial candidates who pledged a temporary halt to new data center development won in 12. These include Texas, Ohio, and Georgia, where construction is most active. Gina Hinojosa, the Texas governor-elect, said in a CNN interview, "Legislation will be prepared to protect Texas residents, and data center-related projects must be suspended until such protective measures are in place."