Japan's Nikkei falls as AI doubts, bond stress weigh

TOKYO: Japan's Nikkei 225 fell sharply on Friday as doubts about the red-hot AI sector emerged and stress in global bond markets weighed on sentiment.

The Nikkei 225 slid 1.06 per cent to 68,308.92 in early trading, poised for a slight weekly decline. The broader Topix slipped 0.24 per cent to 4,081.62.

US equity indexes fell overnight, dragged lower by technology companies after a Financial Times report said OpenAI's annualized revenue was US$20 billion less than the company previously signalled. Euro zone borrowing costs remained elevated as a surge in oil prices intensified inflation, and concerns lingered over France's budget.

"Reports that a major unlisted AI company's revenue fell short of its own forecasts triggered a chain reaction of selling in related stocks, and the sharp rise in crude oil prices also appeared to have an impact," Sony Financial Group analysts said in a report. "Globally high interest rates, driven in part by concerns over France's fiscal situation, are also capping stock price gains."

Data on Friday showed Japan's August household spending fell 3.1 per cent year-on-year, underscoring cautious consumer sentiment and persistent inflation pressures. The Bank of Japan on Thursday noted cost-driven price increases spreading to consumer goods, signalling a meaningful chance of further rate hikes this year.

There were 112 advancers on the Nikkei 225, outweighing 110 decliners, with 3 unchanged.

The largest loser on the Nikkei was SoftBank Group, a major investor in OpenAI, which sank 5.40 per cent and dragged on the index. Furukawa Electric fell 4.83 per cent, followed by Murata Manufacturing, which lost 4.68 per cent.

The index's largest percentage gainers were Nomura Research Institute, up 5.13 per cent, followed by Baycurrent, up 3.97 per cent, and Shift, up 3.92 per cent.