Japan’s Nikkei share average dropped sharply on Friday, sliding more than 2% after a steep overnight decline in shares of Google’s parent company, Alphabet, rekindled concerns about the sustainability of massive spending on artificial intelligence.
As of 0112 GMT, the Nikkei had fallen 2.69% to sit at 64,634.04, while the wider Topix index slipped 1.28% to reach 4,002.09.
The Nikkei has now shed more than 7% during the current month alone, having already slipped into correction territory the previous week. The index has been closely tracking movements in South Korea’s tech-heavy KOSPI benchmark and the U.S. Philadelphia semiconductor index.
Alphabet shares plunged 7% in overnight trading after the company revealed higher-than-expected spending plans alongside significant cash burn. Major U.S. stock indexes also finished lower, with the Nasdaq falling more than 2%.
Kazuaki Shimada, chief strategist at IwaiCosmo Securities, noted that the sharp drop in Alphabet shares overnight brought renewed anxiety over whether the enormous sums being poured into AI infrastructure can be maintained over the long term.
Shimada added, “The (Nikkei) index has been affected by overseas factors, not local cues. Many Japanese companies will start reporting their earnings from today, and if their outlook is strong, the index’s trend may change.”
Semiconductor-related stocks took a notable hit, with Advantest dropping 6.33% and Tokyo Electron falling 5.43%. Technology investment firm SoftBank Group saw its shares fall 7.42%, while memory chip manufacturer Kioxia declined 4.4%.
On the brighter side, stocks linked to domestic demand held up better. Central Japan Railway climbed 1.17% and East Japan Railway edged up 0.6%. Shipping companies also posted gains, with Kawasaki Kisen rising 0.61% and Mitsui OSK Lines advancing 0.88%.
Otsuka Holdings, the company behind the Pocari Sweat sports drink, was the top percentage gainer on the Nikkei, rising 1.6%.
