Japan’s Nikkei share average experienced a decline of up to 3% on Friday, primarily driven by a downturn in chip-related stocks, amid growing apprehensions regarding the viability of expenditures supporting the AI boom. Tokyo tracked overnight losses on Wall Street, influenced by late earnings from Amazon.com and Intel that revealed significant cash burns, resulting in a sharp decline in shares of those companies and their peers during extended trading. “This can be seen as a sign of growing concerns regarding the profitability of AI investments, which is weighing on share prices,” said Maki Sawada.
The market was largely unmoved by the Bank of Japan’s surprise announcement that it would accelerate the pace of its sales of exchange-traded funds from January, as the central bank held interest rates steady in a widely expected move. The Nikkei sank 2.1% to 63,290.11 as of the close of trading, after earlier slumping 3%, led lower by chip equipment heavyweights Advantest and Tokyo Electron, which dropped 5.9% and 5.2%, respectively. Trading has exhibited significant volatility this week, driven by earnings reports from Japan, the US, and South Korea, which have resulted in pronounced fluctuations in technology stocks.
For the week, the Nikkei managed to gain 1%. In contrast, the broader Topix was down a milder 1% on Friday, yet remained flat for the week. In addition to earnings, the decline in crude oil prices, driven by optimism surrounding Middle East peace negotiations, provided a boost to Japanese equities. Resource-scarce Japan relies significantly on energy imports, particularly from the Middle East. Among the components of the Nikkei 225, 123 experienced declines, while 100 saw increases, and two remained unchanged.
Along with Advantest and Tokyo Electron, other notable chip and AI losers included Ibiden, down 15.2%, Lasertec, down 8.8%, and SoftBank Group, down 6%. Earnings also produced some standout performers, with game maker Konami jumping 15% to be the Nikkei’s biggest percentage gainer. Oriental Land, the operator of Tokyo Disney Resort, followed with an 8.5% gain.
