Key Takeaways
- Japan's Nikkei share average dropped more than 2% on Friday.
- Alphabet shares, which sank 7%, led concerns over sustainable AI spending.
- Technology-related stocks, including Advantest and Tokyo Electron, saw significant losses.
Tokyo: Japan's Nikkei share average fell more than 2% on Friday, reflecting global market sentiment amid concerns about heavy artificial intelligence (AI) spending. The broader Topix index also declined by 1.28%. This downturn comes as the Nikkei has lost over 7% this month, entering correction territory last week.
The decline was primarily driven by a sharp drop in Alphabet shares, which are owned by Google and saw their value fall by 7% overnight after reporting higher spending plans while burning cash. Wall Street indexes followed suit, with the Nasdaq shedding more than 2%. Kazuaki Shimada, chief strategist at IwaiCosmo Securities, noted that overseas factors have heavily influenced the Nikkei's performance.
Technology-heavy stocks faced significant losses, with Advantest and Tokyo Electron losing 6.33% and 5.43%, respectively. SoftBank Group also saw a 7.42% drop, while memory chip maker Kioxia lost 4.4%. These declines underscored the market's concerns over the sustainability of heavy AI infrastructure spending.
However, not all sectors were affected negatively. Shares supported by domestic demand rose, with Central Japan Railway and East Japan Railway gaining 1.17% and 0.6%, respectively. Shippers also saw some gains, with Kawasaki Kisen and Mitsui OSK Lines up 0.61% and 0.88%, respectively. Otsuka Holdings, a maker of Pocari Sweat, rose 1.6% to become the top percentage gainer on the Nikkei.
Market analysts are closely watching earnings reports from Japanese companies starting today for any positive outlook that could potentially shift the index's trend. Shimada stated, '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.'
As the market continues to navigate these concerns, investors are keeping a close eye on how domestic companies fare in the coming days. The broader impact of AI spending on global markets remains a key factor influencing investor sentiment.
The (Nikkei) index has been affected by overseas factors, not local cues.
Kazuaki Shimada, Chief Strategist at IwaiCosmo Securities
