Japan's Nikkei slumps up to 3% as tech stocks tumble on AI worries

By Reuters News

- Japan's Nikkei share average dropped as much as 3% on Friday, led by chip-related stocks, as concerns mounted over the sustainability of spending to fund the AI boom.

Tokyo tracked overnight losses on Wall Street, given additional impetus by late earnings from Amazon.com AMZN.O and Intel INTC.O that showed massive cash burns, sending shares of those companies and their peers sharply lower in 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, an equities strategist at Nomura Securities.

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 .N225 sank 2.1% to 63,290.11 as of the close of trading, after earlier slumping 3%, led lower by chip equipment heavyweights Advantest 6857.T and Tokyo Electron 8035.T, which dropped 5.9% and 5.2%, respectively.

Trading has been volatile this week as earnings reports from Japan, the US and South Korea triggered sharp swings in technology stocks.

For the week, the Nikkei managed to gain 1%.

By contrast, the broader Topix .TOPX was down a milder 1% on Friday, but flat for the week.

Beyond earnings, falling crude oil prices on optimism over Middle East peace talks supported Japanese stocks. Resource-poor Japan depends heavily on energy imports, especially from the Middle East.

Among the Nikkei's 225 components, 123 fell versus 100 that rose, with two trading flat.

Along with Advantest and Tokyo Electron, other notable chip and AI losers included Ibiden 4062.T, down 15.2%, Lasertec 6920.T, down 8.8%, and SoftBank Group 9984.T, down 6%.

Earnings also produced some standout performers, with game maker Konami 9766.T jumping 15% to be the Nikkei's biggest percentage gainer. Oriental Land 4661.T, the operator of Tokyo Disney Resort, followed with an 8.5% gain.

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