AI selloff drags Nikkei lower despite broad-based market gains

Japanese stocks traded mixed on Thursday, with the broader market advancing on falling crude oil prices and hopes of an easing in the Iran conflict following a Democratic sweep in the US midterm elections. However, losses in artificial intelligence (AI) and semiconductor stocks weighed on the technology-heavy Nikkei as investors reassessed the outlook for data centre investments, Reuters reported.

According to Reuters, the broader Topix rose 1.3% as of 0131 GMT, after climbing as much as 2.4% earlier in the session. Lower crude oil prices supported Japanese equities, as the resource-poor country relies heavily on energy imports, with a large share of its supplies coming from the Middle East.

Meanwhile, the benchmark Nikkei 225 fell 0.5%, dragged down by sharp losses in semiconductor-related stocks. Reuters reported that chip equipment makers Advantest and Tokyo Electron plunged 10.3% and 8.6%, respectively, extending their declines from Wednesday.


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Reuters reported that concerns over a potential slowdown in AI infrastructure investments following Democratic gains in the US midterm elections triggered a shift in investor positioning away from technology stocks towards other sectors. Investors are increasingly questioning whether the current pace of earnings growth in the AI and semiconductor industries can be sustained if data centre expansion plans face delays.

The broader market's resilience was evident in market breadth, with 168 of the Nikkei's 225 constituents advancing, compared with 56 decliners, while one stock remained unchanged, Reuters reported.

Twenty-five of the Tokyo Stock Exchange's 33 industry sub-indexes traded higher, according to Reuters. Real estate led the gains, rising 6.5%, followed by retail, which advanced 5.4%, and pharmaceuticals, up 5.3%. Fast Retailing, the operator of Uniqlo, surged 7.9%.

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Automaker Toyota gained 5.3% ahead of its earnings announcement scheduled for later in the day. Sony and Nintendo also advanced 6.6% and 4.6%, respectively, ahead of their quarterly results due after the market close, Reuters reported.

Shipping stocks, however, emerged as the biggest sectoral laggards amid expectations that freight rates could decline if an easing of the Middle East conflict improves shipping conditions, according to Reuters.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)