TOKYO - The Nikkei Stock Average plunged 2,566.27 yen, or 3.9%, to close at 62,364.92 on July 28 as a sharp fall in South Korean stocks and growing concerns over intensifying competition in the global semiconductor industry triggered heavy selling in artificial intelligence and chip-related shares.
The benchmark briefly fell more than 3,000 yen and slipped below 62,000 during the session before recovering slightly in the closing auction. The decline marked a sharp reversal after recent gains and left the Nikkei about 10,000 yen below its record high of 72,366 set on June 25.
The broader TOPIX index also fell sharply, losing 2.5% to finish at 3,963.59, below the 4,000 level. The Tokyo Stock Exchange Growth Market 250 Index dropped 2.6% and fell below its previous low for the year set in January.
Trading value on the Prime Market totaled an estimated 7.8901 trillion yen. Of listed Prime Market shares, 486 advanced and 1,036 declined, meaning about two-thirds of stocks ended lower.
The sell-off accelerated after South Korea's KOSPI index fell as much as 11%, prompting authorities to activate a circuit breaker that suspended trading for 20 minutes during the morning session. The market's decline intensified concerns that the recent correction in AI and semiconductor shares could spread across Asia.
Investors were also unsettled by the July 27 listing of Chinese memory chipmaker ChangXin Memory Technologies, known as CXMT. The listing renewed concerns that increased Chinese production could intensify competition, expand supply and push down semiconductor prices.
Reports that Yangtze Memory Technologies, or YMTC, is also preparing for a listing added to the pressure. YMTC produces NAND flash memory, placing it in more direct competition with Japanese memory manufacturer Kioxia Holdings.
The Philadelphia Semiconductor Index fell to its lowest level in two months in the previous U.S. session and was again more than 20% below its record high. Nvidia dropped 5%, helping lead declines among U.S. semiconductor stocks.
Nvidia came under pressure following reports that it was considering providing a $250 billion equity financing guarantee for OpenAI's large-scale data center project. The report raised concerns about circular financing arrangements and contributed to selling across the chip sector.
ASML also declined after reports that a Chinese state-affiliated company was developing deep ultraviolet lithography equipment used in semiconductor manufacturing. Applied Materials and Lam Research were among other chip equipment makers that fell.
Memory-related stocks were broadly lower after a report suggested that the industry's recent boom could be approaching a turning point. SanDisk was also affected by a brokerage decision to lower its price target.
Kioxia Holdings was the most actively traded stock by value on the Prime Market and remained at its daily limit low. The shares fell below 50,000 yen and closed at 44,550 yen, their lowest level since May 15, when the company announced its full-year earnings.
The decline erased the gains Kioxia had recorded since that previous earnings release. Investors who bought the stock above 50,000 yen were left with losses, increasing concerns that deteriorating sentiment could lead to further selling.
Kioxia is scheduled to release its first-quarter results on July 31. The market will be watching whether the announcement can produce a recovery similar to the rally that followed its previous earnings report.
South Korean memory chipmaker SK Hynix is due to announce earnings on July 29. The results are expected at 9 a.m. Tokyo time, coinciding with the opening of the Japanese market and potentially producing sharp early trading moves in semiconductor shares.
Other Japanese chip-related stocks also suffered heavy losses, including Advantest, Tokyo Electron, Taiyo Yuden, Disco, Lasertec and Ibiden. SoftBank Group also declined, although its fall was less severe than those of several semiconductor manufacturers.
Despite the steep drop in the Nikkei, more than 30% of Prime Market shares advanced. Defensive sectors such as food and pharmaceuticals attracted buying, while some airline shares benefited from lower crude oil prices. Several automakers also gained.
Game shares rose on expectations that greater memory chip competition could eventually reduce component prices and lower manufacturing costs. Nintendo, Konami Group and Bandai Namco Holdings were among the companies attracting buyers.
Nintendo was also supported by expectations surrounding Splatoon Raiders, a Nintendo Switch 2 title released on July 23.
Nippon Steel extended its winning streak to an 11th consecutive session and reached a five-month high. The stock was supported by strong earnings from Cleveland-Cliffs, a U.S. rival of United States Steel, which raised expectations that U.S. Steel's business performance may also be solid.
Nippon Steel's dividend yield stood at around 3.7%, while expectations for continued earnings improvement also supported the shares. The company is scheduled to announce results on August 4.
Japan Tobacco reached a record high, while Oriental Land moved close to its highest level of the year, showing that investors continued to buy value shares and companies expected to report solid earnings even as AI-related stocks weakened.
Market participants said a sustained recovery in Japanese equities may be difficult unless Kioxia and other major semiconductor shares stabilize. Negative developments affecting Nvidia, ASML and memory chipmakers have reduced the likelihood of an immediate return of strong buying in AI-related stocks.
Attention is now turning to a series of major technology and memory company earnings announcements this week. Investors will be looking for signs that corporate results can halt the rapid deterioration in sentiment and provide a catalyst for the market to rebound.
Source: CNBC
