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Nikkei slides to 3-month low as AI stocks tumble on US election jitters

By Reuters News

By Junko Fujita

TOKYO, Nov 4 (Reuters) - Japan's Nikkei slumped to a more than 3-month low on Wednesday as AI-related shares tumbled on concerns that Democratic gains in US midterm elections could lead to tighter regulation of data-centre projects and slower AI infrastructure spending.

The Nikkei share average .N225 fell 3.56% to 60,835.36 by the midday break, hitting its lowest level since July 29, while the broader Topix .TOPX slipped 2.45% to 3,832.27.

Investors worried that a stronger-than-expected Democratic showing could lead to stricter oversight of AI infrastructure, with broader implications for sectors including technology, healthcare, banking and cryptocurrencies.

"Democrats are winning seats in some key states. That fuelled caution for stricter regulations on AI infrastructure investment," said Takamasa Ikeda, a senior portfolio manager at GCI Asset Management.

Democrats flipped a Republican-held Senate seat in North Carolina and performed strongly in several Republican-leaning House districts in Florida, raising hopes they could regain control of Congress.

In Japan, shares of chip-testing equipment maker Advantest 6857.T and Tokyo Electron 8035.T fell 7.8% and 6.28%, respectively, while technology investor SoftBank Group 9984.T slipped roughly 9%. Memory chip maker Kioxia 285A.T was down 11.55%.

Makers of fibre-optic cables, key materials for data centres, also fell, with Fujikura 5803.T and Furukawa Electric 5801.T down 8.49% and 9.66%, respectively.

A stronger-than-expected Democratic advance is a headwind for Japanese tech shares, but strong earnings and outlooks from companies such as Advantest and Tokyo Electron should help underpin valuations, said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

Uniqlo-brand owner Fast Retailing 9983.T rose 1.21% and provided the biggest support to the Nikkei.

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