Key facts
- Japan's Nikkei share average fell more than 2% on Friday.
- Alphabet shares declined 7% overnight due to increased spending plans.
- The Nikkei has lost over 7% this month, entering correction territory.
- Chip-related stocks like Advantest and Tokyo Electron experienced significant drops.
- SoftBank Group and Kioxia also saw their share prices fall.
Japan's Nikkei share average experienced a significant drop of over 2% on Friday, primarily driven by concerns about the sustainability of heavy artificial intelligence (AI) spending following a sharp decline in Alphabet shares. The Nikkei was down 2.69% at 64,634.04, while the broader Topix slipped 1.28% to 4,002.09.
Alphabet, the parent company of Google, saw its shares sink 7% overnight after reporting higher spending plans and increased cash burn. This downturn in a major tech stock contributed to Wall Street indexes closing lower, with the Nasdaq shedding more than 2%.
Kazuaki Shimada, chief strategist at IwaiCosmo Securities, noted that the Nikkei's movements have been heavily influenced by overseas factors rather than domestic cues. Concerns have resurfaced regarding whether the substantial investments in AI infrastructure are sustainable.
Reflecting the broader market sentiment, chip-related shares in Japan experienced notable declines. Advantest lost 6.33% and Tokyo Electron fell 5.43%. Technology investor SoftBank Group dropped 7.42%, and memory chip maker Kioxia declined by 4.4%.
In contrast, shares supported by domestic demand showed resilience. Central Japan Railway rose 1.17% and East Japan Railway gained 0.6%. Shippers also performed well, with Kawasaki Kisen up 0.61% and Mitsui OSK Lines up 0.88%. Otsuka Holdings, a maker of Pocari Sweat, emerged as the top percentage gainer on the Nikkei, rising 1.6%.
The Nikkei has lost more than 7% so far this month, tumbling into correction territory last week. Its performance has been closely tied to the tech-heavy South Korean benchmark KOSPI and the U.S. Philadelphia semiconductor index.