Japan's Nikkei 225 suffered its steepest one-day drop in months on Friday, tumbling more than 7% as a dramatic selloff in US technology shares rippled across Asian markets. The index briefly dipped below 57,000 before recovering to 57,576.63 by midday in Tokyo, still down 5.7% on the day.
The broader Topix index also fell sharply, extending a retreat that had already pushed the Nikkei down 1.79% on Thursday. Friday's decline of roughly 5.8% in the Topix signaled that the selling was broadening beyond a handful of tech heavyweights, a more concerning development for the wider market.
Wall Street's AI rout spreads to Tokyo
The catalyst came from the US, where the Nasdaq Composite plunged 5.5% and semiconductor shares tumbled 12.3% on Thursday. The S&P 500 lost 4.4%, its worst session since April 2025. Nvidia fell 9.3% and Advanced Micro Devices dropped 17.3%, as investors questioned how quickly AI infrastructure projects could generate returns.
Adding to the pressure, the Democratic victories in the November 3 midterm elections raised concerns about tighter regulation of data-centre construction. Investors worry that increased scrutiny could delay projects and eventually reduce orders for processors, electrical equipment, and other components supplied by Japanese companies. However, analysts caution that this remains a risk rather than an established change in corporate spending plans.
AI-linked Japanese stocks hit hard
The selling hit some of Japan's biggest AI suppliers particularly hard. Rohm tumbled about 20% in morning trading, Furukawa Electric lost more than 19%, Resonac fell roughly 15%, and Kioxia dropped over 12%. SoftBank Group declined around 11%, while Advantest suffered double-digit losses. Their businesses differ, but all have exposure to chips, advanced materials, computing infrastructure, or investment in the AI ecosystem.
Nomura Securities strategist Wataru Akiyama noted that funds previously flowing into AI and semiconductors have shifted to other sectors, but he saw little prospect of a complete reversal in data-centre construction given strategic competition between Washington and Beijing.
Bear-market signal and regional fallout
At midday, the Nikkei was approximately 21% below its June 22 record intraday peak of 72,831.73, crossing the conventional 20% bear-market threshold during trading. A closing level would provide firmer confirmation. The rout was regional, with South Korea's Kospi briefly falling more than 8% and triggering a trading halt, while investors sought the relative safety of government bonds.
AMP chief economist Shane Oliver described the election result as a trigger for a correction in richly valued technology shares, noting they had been vulnerable even before the vote. He said it was too early to identify a bottom but characterized the retreat as potentially more of a correction than a bear market if underlying economic conditions remained sound.
Saxo strategist Charu Chanana cautioned against viewing the Democratic election victories as the end of the AI boom, telling Reuters that technological leadership remained a priority for both parties. She also described an element of panic as crowded and leveraged positions were unwound simultaneously, intensifying the decline.
This article is for informational purposes only and does not constitute financial advice.
