Nikkei Plummets as Tech Fears and AI Spending Doubts Grip Global Markets
Japan's stock market saw significant declines on Friday, with the Nikkei share average falling by more than 2%. The heavy sell-off was attributed primarily to resurfacing concerns over sustainability of intense technology spending and related AI infrastructure investments.The benchmark Nikkei was reported down 2.69% at 64,634.04 as of 0112 GMT. Meanwhile, the broader Topix index also slipped, closing at 4,002.09, a decline of 1.28%. The Nikkei has experienced downward pressure, having lost over 7% this month and entering correction territory last week.
Global Tech Woes Drive Market Downturn
The indices in Japan were heavily influenced by global market trends, specifically the performance of U.S. technology stocks. Shares of Google parent Alphabet sank 7% overnight after the company revealed plans for higher spending while concurrently reporting continued cash burn.This development contributed to Wall Street indexes closing lower, with the Nasdaq shedding more than 2%. Kazuaki Shimada, chief strategist at IwaiCosmo Securities, noted that concerns about whether such heavy AI spending is sustainable have resurfaced amid the sharp decline in Alphabet shares.
Semiconductor and Tech Sector See Sharply Reduced Appetite
The tech sector experienced considerable losses as investor scrutiny intensified over corporate technology budgets. Chip-related stocks saw declines; Advantest dropped 6.33% while Tokyo Electron fell 5.43%. SoftBank Group also registered a significant drop, losing 7.42%, and memory chip maker Kioxia fell by 4.4%.Shimada stated that the Nikkei index has been affected by overseas factors rather than local cues. However, he added that if Japanese companies start reporting earnings with strong outlooks—a trend set to begin soon—the index's current downturn may change course.
Domestic Demand and Shipping Stocks Provide Limited Support
Amidst the global technology concerns, certain sectors supported by domestic demand or international trade showed modest resilience. Both Central Japan Railway and East Japan Railway rose, recording gains of 1.17% and 0.6%, respectively.Shippers also gained modestly in value, with Kawasaki Kisen rising 0.61% and Mitsui OSK Lines increasing 0.88%. Otsuka Holdings, the maker of Pocari Sweat, was among the positive movers, gaining 1.6% to become the top percentage gainer on the Nikkei.
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