(Nov 6): Japan’s Nikkei 225 Stock Average slumped on Friday, putting the tech-heavy gauge into a technical bear market as investors unwind artificial intelligence (AI)-related trades.

The Nikkei fell 6%, below the closely watched 60,000 level and putting it 20% below the peak reached in June. The broader Topix index declined 5.9%, the most since April 2025 and was more than 10% down from its August peak of 4,197.20. Cable maker Furukawa Electric Co and semiconductor company Rohm Co slid more than 8%. 

The weakness in Tokyo followed a post-election drop on Wall Street, where falls in chipmakers snowballed as investors bailed from technology shares on speculation that Democrats will clamp down on the artificial intelligence industry. Moves in Japan were also mirrored in South Korea and Taiwan, which saw sharp sell-offs. 

“Today’s market has the appearance of ‘panic selling,’” said Jumpei Tanaka, the head of investment strategy at Pictet Asset Management Japan. “We are at the ‘brink’ of whether the AI rally is heading toward its end or is merely a temporary pause.” 

Markets across the region saw selling in tech stocks with gauges such as Taiwan’s Taiex entering a bear market, down 20% from its peak levels. South Korea’s Kospi, which includes names such as Samsung Electronics Co and SK Hynix Inc, has plunged as much as 8.8%. 

While stocks took a hit, investors looked towards safer assets. Japan’s bond yields fell across the curve, with the five-year yield falling 15 basis points to 2.04% at one point.

The Nikkei’s significant drop from June has featured a sharp deterioration in sentiment for the formerly high-flying stocks. Kioxia Holdings Corp, which at one point was the world’s best performer and Japan’s most valuable company, has plunged more than 70% from its record high. 

“AI semiconductor stocks have been moving violently lately, which has made them a hard asset to invest in,” said Kazuki Sawamura, a strategist at Shinkin Asset Management. “Since the US economy and corporate earnings are solid, I would also expect that investors will keep seeking other stocks while AI semiconductor stocks are unstable.”

However, the indices are still up year to date, with the Nikkei 225 advancing 14% while the Topix is on course for its fourth consecutive annual gain, the longest streak since 2015. So far this year the Nikkei has underperformed the tech-heavy Kospi index but has still outperformed the S&P 500.

For the Topix index, “some of the decline doesn’t reflect fundamentals and the angle of recovery could be steep”, said Hiroki Takei, a strategist at Resona Holdings. 

Uploaded by Tham Yek Lee