On Thursday, Japan’s Nikkei share average saw its biggest drop in three weeks, pulling back from a record high as investors moved away from AI-related stocks after Broadcom missed its second-quarter revenue targets. Furthermore, rising tensions between the U.S. and Iran have contributed to a decline in risk appetite. The index experienced a decline of 1.36%, concluding at 67,470.69, marking its most significant decrease since May 15. The broader Topix fell by 1.11% to 3,951.85.

The decline comes after the Nikkei closed above the 68,000 mark for the first time yesterday. However, the financial markets experienced a downturn overnight, with the major index declining by 0.7% and oil prices increasing by approximately 2% as tensions in the Middle East escalated, and discussions between Tehran and Washington revealed minimal advancement. Broadcom’s stock dropped over 13% in after-hours trading due to its unsatisfactory results.

On Thursday, technology investor SoftBank Group saw a decline of 11.3% on the Nikkei, acting as the main detractor for the index. The investor was also the index’s largest percentage dropper. Data centre material manufacturers saw reductions, with Ibiden 4062 and Fujikura 5803 falling by 8.1% and 3.9%, respectively. The significant drop of Broadcom led the market to offload shares related to chips, according to Shuutarou Yasuda.

However, the fundamentals for shares related to chips continue to be robust. “These shares, along with AI-related stocks, will remain in the spotlight for investors,” Yasuda said. Bucking the trend, chip-making equipment maker Tokyo Electron experienced a 4.5% increase. The stock acted as the primary support for the Nikkei. Chip designer Disco 6146 saw a rise of 5.1%.