Japan's Nikkei slumps 3% as tech stocks tumble on AI worries

TOKYO, Oct 30 : Japan's Nikkei share average dropped as much as 3 per cent on Friday, led by chip-related stocks, as concerns mounted over the sustainability of spending to fund the AI boom.

Tokyo tracked overnight losses on Wall Street, and were given additional impetus by late earnings from Amazon.com and Intel that showed massive cash burns, sending shares of those companies and their peers sharply lower in extended trading.

"This can be seen as a sign of growing concerns regarding the profitability of AI investments, which is weighing on share prices," said Maki Sawada, an equities strategist at Nomura Securities. "The Japanese stock market is being affected by this fall in US technology shares."

The Nikkei was down 2.8 per cent, as of 2003 GMT, after earlier slumping 3 per cent, led lower by chip equipment heavyweights Advantest and Tokyo Electron, which plunged 9.1 per cent and 5.6 per cent, respectively.

Trading has been volatile this week as earnings reports from Japan, the US and South Korea triggered sharp swings in technology stocks.

For the week, the Nikkei remains up 0.2 per cent.

By contrast, the broader Topix was down a milder 1.3 per cent on Friday, but set to lose 0.4 per cent this week.

Beyond earnings, falling crude oil prices on optimism over Middle East peace talks supported Japanese stocks. Resource-poor Japan depends heavily on energy imports, especially from the Middle East.

The Bank of Japan will announce its policy decision on Friday and is widely expected to leave interest rates unchanged, although investors will be watching for signals on the likelihood of a rate hike at its December meeting.

Among the Nikkei's 225 components, 123 fell versus 100 that rose, with two trading flat.

Along with Advantest and Tokyo Electron, other notable chip and AI losers included Ibiden, down 15.2 per cent, Lasertec, down 13.8 per cent, and SoftBank Group, down 6.7 per cent.

Earnings also produced some standout performers, with game maker Konami jumping 15.3 per cent to become the Nikkei's biggest percentage gainer. Oriental Land, the operator of Tokyo Disney Resorts, followed with a 6.6 per cent gain.