Global Market: Japan’s Nikkei falls as chip stocks retreat on AI spending concerns

Japan’s Nikkei share average declined on Thursday as semiconductor stocks surrendered some of the previous session’s gains, with investors weighing the outlook for artificial intelligence-related spending in 2027.

The tech-heavy Nikkei 225 fell 0.8% to 64,128.54 by 0137 GMT, after rising 0.9% on Wednesday. The broader Topix index was largely unchanged, following a 0.9% advance in the previous session.

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Chip-related stocks led the decline, with Tokyo Electron falling 4.1% and becoming one of the biggest drags on the Nikkei because of its heavy weighting in the index. Screen Holdings dropped 6%, while Lasertec declined 2.7%. Data-centre cable maker Fujikura lost 3%, and SoftBank Group, an investor in artificial intelligence-focused startups, slipped 3.1%.

Concerns over the sustainability of AI capital expenditure weighed on sentiment, despite broadly solid earnings from US chip equipment maker Lam Research. Its shares fell in extended trading after the results, with worries about demand from China adding to investor caution.

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According to Reuters, Iwai Cosmo Securities analyst Kazuyoshi Saito said concerns remained that Chinese customers had accelerated purchases of semiconductor manufacturing equipment ahead of potential regulatory tightening, potentially leaving demand vulnerable to a subsequent slowdown.

Japanese equities were also susceptible to profit-taking after gains in the previous session, following strong after-market earnings reports from US companies SpaceX and Super Micro Computer on Tuesday, Nomura Securities equities strategist Wataru Akiyama said.

Investors are increasingly looking towards 2027 to assess whether spending on AI infrastructure and computing capacity can maintain its momentum, Akiyama said, highlighting the caution surrounding the sector's longer-term growth prospects.

However, gains in other technology stocks helped limit the broader market's decline. Cybersecurity firm Trend Micro surged 6.6% after the disclosure of critical vulnerabilities in the PHP programming language prompted several European governments to take their websites offline as a precaution.

IT services provider SHIFT climbed 9%, making it the Nikkei's biggest percentage gainer, while IT consultancy BayCurrent advanced 5.9%. Sony shares rose 2.6%.

Among the Tokyo Stock Exchange's 33 industry groups, services was the strongest performer, gaining 2.2%.

The contrasting performance of semiconductor and other technology stocks highlighted investors' increasingly selective approach to the AI trade, as markets assess whether strong earnings and continued infrastructure investment will be sufficient to sustain the sector's rally into next year.


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