Japan’s Nikkei 225 plunged more than 7% on Friday as a dramatic collapse in US technology shares spread across Asia, forcing investors to reassess the outlook for artificial intelligence spending.
The index briefly fell below 57,000 before recovering to 57,576.63 by midday in Tokyo, still down 5.7%.
The broader Topix also fell sharply, extending a retreat that had already pushed the Nikkei down 1.79% on Thursday.
The selling followed a 5.5% plunge in the Nasdaq Composite and a 12.3% slide in US semiconductor shares.
Concerns about tighter US regulation have intensified an ongoing debate over costly AI investments.
Nikkei 225 crash today: Wall Street’s AI rout spreads to Tokyo
US technology stocks suffered their sharpest setback since April 2025 on Thursday, with the S&P 500 losing 4.4%.
Nvidia fell 9.3% and Advanced Micro Devices dropped 17.3% , as investors questioned how quickly AI infrastructure projects could generate returns.
Democrats’ victories in the November 3 midterm elections added another uncertainty. Investors worry greater scrutiny of data-centre construction could delay projects and eventually reduce orders for processors, electrical equipment and other components supplied by Japanese companies.
That remains a risk rather than an established change in corporate spending plans.
The technology sector was already under pressure from high valuations, borrowing costs and concerns about customers’ cash generation.
AMP chief economist Shane Oliver said the election result had supplied a trigger for a correction in richly valued technology shares, telling Reuters on Friday that they had been vulnerable even before the vote.
He said it was too early to identify a bottom, but described the retreat as potentially “more of a correction than a bear market” if underlying economic conditions remained sound.
Why is Nikkei 225 falling today?
The selling hit some of Japan’s biggest AI suppliers particularly hard.
Rohm tumbled about 20% in morning trading, Furukawa Electric lost more than 19%, Resonac fell roughly 15% and Kioxia dropped over 12%. SoftBank Group declined around 11%, while Advantest suffered double-digit losses.
Their businesses differ, but all have exposure to chips, advanced materials, computing infrastructure or investment in the AI ecosystem.
“Funds that had previously been flowing into AI and semiconductors have shifted to other sectors,” Nomura Securities strategist Wataru Akiyama told Reuters on Thursday.
Still, he saw little prospect of a complete reversal in data-centre construction, given strategic competition between Washington and Beijing.
The Nikkei’s price-weighted construction makes the market particularly sensitive to large moves in expensive constituent shares.
On Thursday, most of its 225 constituents gained despite the benchmark falling, while the broader Topix rose 1.16%.
Friday’s Topix decline of roughly 5.8% showed the latest selling was spreading beyond a small group of technology leaders, a far more troubling signal for the wider market.
Nikkei 225 bear market signal raises questions about recovery
At midday, the Nikkei was approximately 21% below its June 22 record intraday peak of 72,831.73. That crossed the conventional 20% bear-market threshold during trading, although a closing level would provide firmer confirmation.
The rout was regional. South Korea’s Kospi briefly fell more than 8%, triggering a trading halt, while investors sought the relative safety of government bonds.
Saxo strategist Charu Chanana cautioned against viewing Democratic election victories as the end of the AI boom, telling Reuters that technological leadership remained a priority for both parties.
She also described “an element of panic” as crowded and leveraged positions were unwound simultaneously, intensifying a decline already under way.
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