Tokyo Stocks Fall for Third Day as Semiconductor Selling Continues

Japan's Nikkei 225 Stock Average continued its downward trend for the third straight day on Monday, October 26, as losses in semiconductor and artificial intelligence-related shares weighed heavily on the market. The Nikkei closed at 62,189.65, down 503.51 points, or 0.80%, from Friday. In contrast, the TOPIX index gained 7.17 points to 3,972.98, indicating that the market weakness was concentrated in a small group of heavily weighted technology stocks.

Investors are reassessing massive capital commitments made to AI infrastructure while shifting funds towards energy, trading companies, and other sectors benefiting from high commodity prices. This divergence in performance highlights investors' concerns about the sustainability of the global AI investment boom, particularly as major tech firms commit substantial sums to data centers, processors, and computing infrastructure.

Semiconductor-related stocks suffered significant losses, with silicon wafer manufacturer Sumco down about 4%, Kokusai Electric declining near 4%, and Screen Holdings experiencing substantial losses. The Nikkei has now lost over 3,100 points from its October 16 close, amid uncertainty over AI investment returns, persistent inflation fears, and geopolitical tensions.

The broader market, however, remained more resilient than the Nikkei, with 816 stocks advancing compared to 682 declining on the Tokyo Stock Exchange's Prime Market. Mining, petroleum, and coal products, wholesale trading, and shipping were among the strongest sectors. Technology and semiconductor companies facing selling pressure due to Wall Street losses and concerns over the financial viability of the AI investment boom.

The market is now focusing on the Bank of Japan's upcoming monetary policy meeting on October 29 and 30, where policymakers may leave the benchmark interest rate unchanged at 1.25% while signaling potential future rate hikes.