Japan's Nikkei tumbles on tech rout despite strength in wider market

By Reuters News

- Japan's Nikkei share average tumbled on Thursday, dragged lower by a sharp selloff in AI and chip shares even as the vast majority of stocks on the index rose.

A Democratic sweep in US midterm elections provided the catalyst for the tech rout on bets that Democrats will slow the pace of AI data centre expansion.

Other sectors benefited though, such as real estate and retail, as investors rotated positions.

Toyota Motor 7203.T was a standout winner, surging 16.7% after raising its profit forecast.

"Funds that had previously been flowing into AI and semiconductors have shifted to other sectors," said Wataru Akiyama, an equities strategist at Nomura Securities.

"There is now a growing view that the Democrats' gains will lead to delays in data-centre plans, (meaning) the current pace of earnings growth may not be sustained."

However, "given the strategic competition between the US and China, it is unlikely that the trend in data-centre construction will be reversed," he said.

The tech-heavy Nikkei .N225 ended 1.8% lower, weighed down by chip equipment firms Advantest 6857.T and Tokyo Electron 8035.T, which plunged 14.7% and 9.4%, respectively.

Of the Nikkei's 225 components, 161 rose versus 64 that fell.

The broader Topix index .TOPX gained 1.2%, with 25 of its 33 industry groupings advancing, led by an 11.8% rally for transport equipment .ITEQP.T and a 7.2% jump for real estate .IRLTY.T.

Uniqlo store operator Fast Retailing 9983.T climbed 4.7%, helping the retail sector .IRETL.T advance 5.1%.

The broad market was also buoyed by lower crude oil prices after US President Donald Trump said voter discontent with the Iran war had contributed to losses for his Republican party, raising bets for an earlier end to the conflict.

Resource-poor Japan imports almost all its energy needs, mostly from the Middle East.

Shipping .ISHIP.T was among the worst-performing sectors, declining 6.9% amid prospects for lower freight rates if the Middle East conflict eases.

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