Japan?s stock market plunges as AI concerns trigger a tech selloff

Japan?s Nikkei 225 Index plunged 4.9% to close at 64,426 on Thursday, marking its biggest one-day fall since March. The decline was driven by heavy selling in technology stocks as investors grew concerned about whether massive investments in artificial intelligence (AI) can deliver the expected returns.

Concerns also increased over the impact of persistent energy-driven inflation, which could force policymakers to raise borrowing costs. Higher interest rates can increase financing costs for companies and put pressure on stock valuations, particularly in the technology sector.

Japanese companies have significant exposure to the global AI infrastructure boom, making them vulnerable to a sharp correction in highly valued stocks. Technology and AI-related shares led the market decline, with Kioxia falling 12.5%, Advantest plunging 14.2%, SoftBank Group dropping 8.9%, Taiyo Yuden declining 10% and Lasertec losing 13.3%.

Banking stocks also ended lower, with Mitsubishi UFJ falling 1.6%, Sumitomo Mitsui declining 1.7% and Mizuho Financial dropping 2.7%. Overall, concerns over AI valuations, inflation and the possibility of higher interest rates weighed heavily on investor sentiment.

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