October 30, 2026, (Inside AI) — Japan's benchmark Nikkei 225 share average fell as much as 3% on Friday, led by a sharp selloff in semiconductor and artificial intelligence-related stocks, as investors questioned whether the massive spending underpinning the AI boom can generate sustainable profits. The index was down 2.8% by the afternoon session in Tokyo, recovering slightly from an earlier 3% plunge.
The decline tracked overnight losses on Wall Street and was intensified by late earnings reports from Amazon.com and Intel, which revealed significant cash burn and sent their shares and those of peers sharply lower in extended trading. The selloff in Tokyo was concentrated in chip equipment heavyweights Advantest, which plunged 9.1%, and Tokyo Electron, which fell 5.6%.
"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 broader Topix index fell a milder 1.3% on Friday, though it remained on track for a 0.4% weekly loss. The Nikkei, despite Friday's drop, is still up 0.2% for the week, reflecting volatile trading driven by earnings reports from Japan, the US, and South Korea that triggered sharp swings in technology stocks.
The selloff was not uniform. Among the Nikkei's 225 components, 123 fell against 100 that rose, with two trading flat. Other notable chip and AI losers included Ibiden, down 15.2%, Lasertec, down 13.8%, and SoftBank Group, down 6.7%. Earnings also produced standout performers: game maker Konami jumped 15.3% to become the Nikkei's biggest percentage gainer, while Oriental Land, operator of Tokyo Disney Resorts, gained 6.6%.
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, though investors will watch for signals on the likelihood of a rate hike at its December meeting.
The AI-driven volatility in Tokyo mirrors a broader global recalibration of technology valuations. Earlier this year, chip stocks surged on expectations that AI infrastructure spending would remain uncapped. Now, with Amazon and Intel reporting heavy cash outflows, investors are beginning to price in the risk that the returns on these investments may lag the costs. Japan's semiconductor equipment makers, which supply the global foundry and memory markets, are particularly sensitive to any slowdown in AI capital expenditure.
This is not the first time AI enthusiasm has collided with earnings reality. In 2024, a similar pattern emerged when early AI adopters reported rising costs without commensurate revenue gains, triggering brief but sharp selloffs in chip stocks. The difference now is scale. The current wave of spending involves hundreds of billions of dollars in data center construction and chip fabrication capacity. When companies like Amazon and Intel signal cash burn, the market reads it as a warning that the AI investment cycle may be peaking. For Japan, whose export-heavy economy relies on semiconductor equipment sales, that warning carries outsized weight.
Looking ahead, the Bank of Japan's policy decision and its signals on future rate hikes will be critical for market sentiment. A stronger yen could further pressure exporters' earnings, while any hint of tightening could dampen risk appetite. For now, the Nikkei's weekly gain offers a small cushion, but the underlying tension between AI spending and profitability remains unresolved.
