Japan’s Nikkei sinks as tech shares track US peers lower

TOKYO: Japan’s Nikkei share average dropped more than 1% on Monday as tech stocks tracked their Wall Street peers lower on lingering worries over stretched valuations.

The Nikkei slid 1.2% to 50,220.15 by mid-morning, with artificial intelligence (AI)-focused startup investor SoftBank Group and chip-testing-tool maker Advantest - an Nvidia supplier - the biggest drags on the index by a wide margin.

The broader, less tech-heavy Topix, by contrast, was down just 0.1% to 3,418.94.

Of the Nikkei’s 225 components, risers and fallers were evenly split at 110, with five shares trading flat.

“This is not broad-based weakness in stocks across sectors,” said Nomura Securities strategist Fumika Shimizu.

“It feels like a sector rotation” away from the big tech shares that have performed so strongly this year, she said.

SoftBank Group tumbled 6.3% and Advantest slumped 5.8%, between them accounting for 533 points of the Nikkei’s total 671-point slide.

Fujikura, another darling of the AI trade in Japan, dropped 3.7%.

On Friday, the Philadelphia SE semiconductor index plunged more than 5%, with investors leaving technology for other sectors amid concerns about an AI bubble.

In Japan, domestic demand stocks were notable beneficiaries of the exodus from tech shares.

Rail, pharmaceuticals and retail were the three top performers among the Tokyo Stock Exchange’s 33 industry groups, each rising between 1.5% and 1.8%.

Banking climbed 1.3% ahead of an expected interest rate increase by the Bank of Japan on Friday, with those bets reinforced on Monday by the central bank’s quarterly Tankan survey, which showed sentiment among big manufacturers rose to a four-year high.