Japan’s Nikkei share average fell to a new two-month low on Wednesday, as investors liquidated chip-related stocks in anticipation of significant U.S. technology earnings, while escalating conflict in the Middle East suppressed risk appetite. Asian chipmakers have experienced significant volatility lately, as concerns regarding the returns from the substantial investments made by AI companies arise in the context of increasing competition from China. The tech-heavy Nikkei was last down 1.79% to 61,251.18, after falling as much as 3.087% and extending the previous session’s more-than 4% fall.

The broader Topix experienced a decline of 0.18%, settling at 3,957.29. “There was no fresh event that soured sentiment; the market is simply extending its recent trend,” stated Shingo Ide. Semiconductor equipment manufacturer Screen Holdings experienced a decline exceeding 19%, marking its most significant percentage drop since January 2020. Memory chipmaker Kioxia experienced a decline of up to 15.11%, while Tokyo Electron saw a reduction of 12.07%.

The Nikkei has closely followed the movements in South Korea’s tech-heavy benchmark KOSPI and the U.S. Philadelphia semiconductor index. The KOSPI experienced a decline exceeding 11% following the release of chipmaker SK Hynix’s impressive quarterly results, which, however, did not meet the elevated expectations of investors. The U.S. chip index experienced a decline of nearly 4.5% during the overnight session on Tuesday. Japanese stocks may not have fully completed their correction, but they had fallen to levels where the adjustment could have run its course. “For markets such as the KOSPI, the correction may still have further to go,” Ide said. U.S. technology giants Microsoft and Amazon are set to announce their earnings this week.

In Japan, the chip-testing equipment manufacturer Advantest is set to disclose its results on Wednesday. Oil prices increased by over $3 a barrel following military actions by the U.S. and Saudi Arabia against Iran-linked forces in Iraq. In other stocks, Keyence surged as much as 15.42%, positioning itself among the Nikkei’s most significant percentage gainers, following the release of strong earnings by the factory automation sensors and systems provider. Video game company Konami experienced a gain of 9.91%, while cosmetics firm Shiseido saw an increase of 7.35%.