Japan's Nikkei Drops 2.7% as Global AI Spending Concerns Weigh on Tech Shares
Japanese equities extended their monthly decline as a slump in US technology stocks reignited investor fears over the sustainability of artificial intelligence infrastructure investments.
Japan’s Nikkei share average plunged 2.69 per cent to 64,634.04 in early trading on Friday, extending a brutal stretch for domestic equities. The broader Topix index also retreated, slipping 1.28 per cent to 4,002.09 as risk aversion took hold.
The sell-off was directly tied to a sharp overnight decline in Alphabet shares, which reignited market anxieties regarding heavy capital expenditures in artificial intelligence. Global investors are increasingly questioning whether current levels of AI infrastructure spending can be sustained without immediate, proportional revenue returns.
This latest drop pushes the Nikkei’s monthly loss to more than 7 per cent, having already tumbled into correction territory last week. The Japanese benchmark remains highly sensitive to external movements, closely tracking the tech-heavy South Korean KOSPI and the United States Philadelphia semiconductor index.
Kazuaki Shimada, chief strategist at IwaiCosmo Securities, emphasized that global markets are driving the local downturn. "The (Nikkei) index has been affected by overseas factors, not local cues," Shimada said. He added that strong corporate earnings could alter the trajectory, noting, "Many Japanese companies will start reporting their earnings from today, and if their outlook is strong, the index's trend may change."
Semiconductor and technology names bore the brunt of the selling pressure as the AI narrative cooled. Advantest and Tokyo Electron tumbled 6.33 per cent and 5.43 per cent, respectively, while memory chip manufacturer Kioxia dropped 4.4 per cent. Technology investment conglomerate SoftBank Group also suffered a steep 7.42 per cent decline.
Conversely, traditional industrial and shipping stocks managed to post modest gains amid the broader market weakness, offering a slight hedge for diversified portfolios. Kawasaki Kisen and Mitsui OSK Lines advanced 0.61 per cent and 0.88 per cent, respectively.
Defensive consumer stocks also attracted selective buying interest as traders rotated out of high-growth technology names. Beverage and pharmaceutical company Otsuka Holdings, widely known for its Pocari Sweat brand, climbed 1.6 per cent to stand as the top percentage gainer on the Nikkei index.
