Nikkei tumbles nearly 5% as AI worries and US inflation spook investors
Japan's Nikkei plunged 4.9 per cent on Thursday as tech stocks were hammered by concerns over AI-related debt and hot US inflation data. Chip equipment makers led the decline, while defensive pharmaceutical stocks gained as investors rotated away from risk.
Japan's Nikkei share average tumbled nearly 5 per cent on Thursday, with tech stocks hit hard by media reports about distressed debt at US cloud-computing provider CoreWeave, while hot US inflation figures sparked fears of higher interest rates.
The tech-heavy Nikkei ended the day down 4.9 per cent at 64,425.95. The broader Topix fell 2.4 per cent. Selling was concentrated among AI-linked stocks, with chip equipment makers Advantest and Tokyo Electron sliding 15 per cent and 7.8 per cent, respectively. AI-focused startup investor SoftBank Group skidded 9.3 per cent.
The market failed to draw any support from Taiwanese chipmaker TSMC's record earnings, which came late in the Tokyo session.
Overnight, a hotter-than-expected US CPI reading stoked bets that the Federal Reserve will need to raise rates earlier and keep them elevated longer, taking a toll on the highly leveraged tech sector. The US Nasdaq Composite slumped 1.9 per cent on Wednesday.
CoreWeave plunged more than 15 per cent, even after the company's CEO said in an employee memo that its deal backlog is large enough to cover its debt obligations.
"Concerns have been raised that the financial health of AI-related companies may be deteriorating," said Nomura strategist Wataru Akiyama. "Consequently, concerns regarding AI capital expenditure and the profitability of the AI business have risen rapidly."
A standout winner on the day was pharmaceuticals, which was the Tokyo exchange's best-performing industry group, climbing 4 per cent as investors rotated into the traditionally defensive sector. Sumitomo Pharma was the Nikkei's biggest percentage gainer, up 15.8 per cent.
Of the Nikkei's 225 components, 136 fell versus 87 that rose, with two ending flat.