Japan's Nikkei plunges as tech stocks hammered by AI, rate hike worries

Japan’s Nikkei share average plummeted nearly 5% on Thursday, with technology stocks severely impacted by reports of CoreWeave, a US cloud-computing company, facing financial difficulties. The tech-heavy Nikkei index fell 4.8% to 64,489.06 at midday, while the broader Topix declined 2.5%. The majority of the selling targeted AI-linked stocks, including chip equipment manufacturers Advantest and Tokyo Electron, which dropped 13.9% and 7.3%, respectively.

Additionally, SoftBank Group shed 9.4% of its value. Reports of a hotter-than-anticipated US Consumer Price Index (CPI) figure heightened concerns that the Federal Reserve may need to hike interest rates sooner and maintain them higher for a longer period, causing damage to the tech-heavy sector. The Nasdaq Composite index in the United States fell 1.9% on Wednesday.

CoreWeave experienced a more than 15% decline, despite its CEO stating in an internal memo that its deal pipeline is sufficient to cover its debt obligations. Wataru Akiyama, a strategist at Nomura, cautioned that worries about the financial stability of AI-related firms, particularly their capital expenditures and profitability, are intensifying.

Pharmaceuticals emerged as the sole bright spot on the day, recording a 3.4% increase and becoming the best-performing industry group on the Tokyo Stock Exchange. Sumitomo Pharma led the Nikkei's percentage gainers with a 13% increase. Out of the 225 stocks comprising the Nikkei, 145 experienced losses, while only 80 managed to gain.