Japanese Stocks Decline as Tech Selloff Deepens on AI Worries

Japanese equities fell at the open as chip stocks declined amid concerns about the viability of the artificial intelligence trade.

The chip-heavy Nikkei 225 Stock Average fell as much as 2.3%, set for a 10% decline from its Oct. 6 high of 70,683.98. The broader Topix was down as much as 1.4% with Advantest Corp. contributing the most to the index’s decline.

Technology shares fell, with electronic components maker Taiyo Yuden Co. and semiconductor materials producer Sumco Corp. among the worst performers on the Nikkei 225, tracking a selloff in US chip stocks on Friday. The Philadelphia Semiconductor Index fell for an eighth straight session, its longest daily losing streak since 2008.

In the US, shares of cloud-computing service provider CoreWeave Inc. plunged 12% on Friday amid a continuing tug-of-war between concerns over rising bond yields and optimism that demand for computing power will eventually outweigh those worries.

“Financing is rapidly emerging as a new and potentially systemic risk” facing the AI sector, writes Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors in Singapore, in a note to clients. “The reality of this financing crunch is becoming impossible to ignore.”

Investor attention will also likely shift to the upcoming earnings season. In the US, more than 70 S&P 500 companies are due to report this week, including Magnificent Seven members Tesla Inc. and Meta Platforms Inc. In Japan, semiconductor equipment maker Disco Corp. and factory automation company Fanuc Corp. are set to report quarterly results.