Japan's Nikkei drops over 3% as chip stocks slide

TOKYO: Japan’s Nikkei share average dropped more than 3% on Thursday, weighed down by chip-related stocks, as investors awaited results from Taiwan’s TSMC after markets had largely priced in a solid outlook from Dutch chip equipment maker ASML.

The Nikkei lost 3.1% to 66612.63 in late-morning Asian trading.

The broader Topix slid 1.2% to 4,039.56.

“There has recently been a noticeable divergence between semiconductor stocks and the broader market, and today is no exception, with high-tech shares undergoing a correction,” said Hiroki Takei, a strategist at Resona Holdings.

Memory chipmaker Kioxia was the Nikkei gauge’s biggest loser with a 15.3% fall, the biggest drop since November last year.

SoftBank Group, a tech investment conglomerate, slumped 7.4%, and chip-testing equipment maker Advantest shed 6.9%.

Takei added the recent volatility in high-tech shares appeared to be driven more by supply-demand factors than by fundamentals, pointing to a sharp fall in South Korean shares linked to issues around leveraged ETFs and elevated margin buying by individual investors in Japan in recent weeks.

Markets are awaiting an earnings call from Taiwan Semiconductor Manufacturing (TSMC) later in the day.

The world’s largest manufacturer of advanced AI chips is expected to notch a fifth consecutive quarter of record earnings, after a 59% surge in net profit for April-June, driven by booming global demand for AI infrastructure.

The Nikkei closed nearly 1.5% higher on Wednesday after ASML’s strong outlook raised its financial forecasts for this year, while the Philadelphia Semiconductor index hit a one-week low.

Market breadth was slightly positive, with 114 advancers on the Nikkei 225 against 108 decliners and four unchanged.

Meanwhile, Nichirei shares jumped 7.2% on Thursday after the frozen-foods and cold-chain logistics firm said it would resume frozen-food shipments and refrigerated warehouse operations halted due to cyberattacks.

It plunged 8.2% on Wednesday, the biggest percentage drop in almost a year.