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Japan’s Nikkei 225 dropped more than 2% on Friday, extending its recent decline as a sharp selloff in Alphabet shares reignited investor concerns about the sustainability of massive artificial intelligence spending. Weak sentiment from Wall Street weighed heavily on Japanese technology and semiconductor stocks, pushing the benchmark deeper into correction territory.
The Nikkei fell 2.69% to 64,634.04, while the broader Topix index declined 1.28% to 4,002.09. The benchmark has now lost more than 7% this month after sliding into correction territory last week. Market performance has been closely tied to movements in South Korea’s tech-heavy KOSPI and the U.S. Philadelphia Semiconductor Index.
Investor sentiment deteriorated after Google parent Alphabet plunged more than 7% overnight following its latest earnings report, which revealed increased capital spending and weaker cash flow. The Nasdaq also ended the session down more than 2%, adding to concerns over the pace of AI infrastructure investment.
Kazuaki Shimada, chief strategist at IwaiCosmo Securities, said investors are questioning whether aggressive AI-related spending can be sustained. He added that the Nikkei’s recent direction has been driven largely by overseas developments rather than domestic factors. However, with many Japanese companies beginning to release earnings results, stronger corporate outlooks could help shift market sentiment.
Technology and chip-related stocks led the declines. Semiconductor equipment maker Advantest dropped 6.33%, while Tokyo Electron lost 5.43%. SoftBank Group, a major technology investor, tumbled 7.42%, and memory chip manufacturer Kioxia fell 4.4%.
In contrast, domestically focused stocks showed resilience. Central Japan Railway gained 1.17%, while East Japan Railway advanced 0.6%. Shipping companies also outperformed, with Kawasaki Kisen rising 0.61% and Mitsui O.S.K. Lines adding 0.88%.
Among Nikkei constituents, Otsuka Holdings, the maker of Pocari Sweat, was the session’s top performer, climbing 1.6% despite the broader market weakness.
