Nikkei Falls 1.8% as Advantest and Tokyo Electron Slump on US AI Spending Fears

The fall was concentrated in a few names. Of the 225 stocks in the Nikkei, 161 rose and 64 fell. The broader Topix gained 1.2%, with 25 of its 33 industry groups higher. The Nikkei is heavily weighted towards technology, so a sharp drop in a handful of large AI suppliers was enough to pull the headline index down.

Advantest makes testing equipment for advanced chips and Tokyo Electron makes chipmaking tools. Both have been among the biggest winners from AI-driven capital spending by US hyperscalers. Thursday's selling shows how much their valuations now depend on investors' views of US data centre policy. Markets in Taiwan and South Korea fell on the same fears this week.

Wataru Akiyama of Nomura Securities said money that had been going into AI and semiconductor stocks was moving into other sectors. He said more investors now expect the Democratic wins to delay data centre plans, which would make current earnings growth hard to sustain. But he also said strategic competition between the US and China makes it unlikely that the overall course of data centre construction will change.

Investors moved into other sectors. Toyota Motor jumped 16.7% after raising its profit forecast, and transport equipment led the Topix with a gain of 11.8%. Real estate rose 7.2%. Retail rose 5.1%, helped by a 4.7% rise in Fast Retailing, which owns Uniqlo.

Lower crude prices also lifted the market. Oil fell after President Donald Trump said voters' unhappiness with the war with Iran had contributed to Republican losses, which raised hopes that the conflict could end sooner. Japan imports most of its energy, mainly from the Middle East. For the same reason, shipping was among the weakest sectors, down 6.9%, on expectations that freight rates will fall if tensions in the region ease.

The new Congress takes office in January. Until then, investors will be watching for signs of whether Democratic lawmakers and incoming governors follow through on slowing large data centre projects.