Nikkei Slips as Chip Selling Offsets Broader Market Strength

Tokyo’s stock market slipped on August 7, with the Nikkei 225 closing at 65,606.71, a 0.12% decline of 76.55 points. The drop was primarily driven by selling in chip-related and AI-linked shares, despite solid gains in the broader market and a late rally led by Fujikura. The TOPIX, a broader market index, rose about 0.47%, indicating the weakness was limited to a few high-priced technology shares.

This pattern of the Nikkei being influenced by AI and semiconductor heavyweights while the broader market found support from other sectors had been recurring throughout late July and early August. The Nikkei had been weaker throughout the day after a decline in U.S. technology shares overnight and a rise in oil prices due to Middle East concerns.

Early trading was dragged down by semiconductor and chip-equipment names, but the index narrowed its decline by the close after Fujikura’s revised earnings boosted buying in data-center infrastructure shares. Despite the overall market weakness, more than half of Prime Market stocks gained, suggesting continued investor interest in Japanese equities with strong earnings visibility, pricing power, or domestic demand.

SoftBank Group, due to its significant weight in the Nikkei and as a proxy for global AI investment sentiment, remained a major drag on the index. Its stock fell despite reporting quarterly profits above expectations, with investors concerned about the cost and financing of SoftBank’s aggressive AI strategy. Chip-related shares also impacted the market negatively, with several semiconductor equipment names facing pressure due to concerns about the recent AI hardware stock rally.

Kioxia Holdings, a memory-chip maker, was closely watched as a gauge of confidence in AI servers and data centers. Fujikura’s earnings revision was the standout positive story, helping to offset the Nikkei’s decline and reinforcing investor interest in optical fiber, cables, and power-related components used in data centers. The market also remained sensitive to developments in South Korea, where the Kospi fell for a seventh consecutive week, despite earlier strength in AI-related chip stocks.

The weakening yen during the session, trading around 158.38 yen against the dollar, also affected the market, supporting exporters but increasing the cost of imported goods, which could weigh on automakers, electronics makers, and other exporters. The currency's direction was increasingly seen as a policy signal rather than just an earnings factor.