Japan’s Nikkei 225 entered bear market territory on Friday as a sharp selloff in artificial intelligence and semiconductor stocks sent Japanese equities sharply lower. The benchmark index has now fallen more than 20% from its June record high, reflecting growing concerns about technology valuations and the sustainability of the global AI investment boom.
The latest decline followed heavy losses on Wall Street, where investors continued selling technology shares amid uncertainty surrounding artificial intelligence spending, corporate profitability, and potential US regulatory changes.
The Nikkei plunged as much as 7.1% to 56,745.81 points during Friday’s trading session. Meanwhile, Japan’s broader Topix index dropped as much as 6.4%, marking its steepest decline since April 2025.
Nikkei 225 Enters Bear Market After 22% Decline
Japan’s benchmark stock index officially entered technical bear market territory after falling more than 20% from its previous peak.
At its intraday low, the Nikkei 225 stood approximately 22.1% below its June 22 record high of 72,831.73 points.
The decline pushed the index below 60,000 points for the first time since May, highlighting the speed and severity of the recent market reversal.
A bear market is generally defined as a decline of at least 20% from a recent market peak.
The latest downturn also extended Thursday’s 1.8% decline, adding to the losses accumulated during the broader global technology stock selloff.
Investors have become increasingly cautious about whether the rapid expansion of artificial intelligence infrastructure can generate sufficient profits to justify elevated semiconductor and technology stock valuations.
Japanese Semiconductor Stocks Suffer Heavy Losses
Semiconductor manufacturers and artificial intelligence-related companies were among the hardest-hit stocks during Friday’s trading session.
Rohm shares plunged approximately 20%, while Furukawa Electric dropped more than 19%.
Resonac declined around 15%, reflecting widespread selling pressure across Japan’s semiconductor supply chain.
Memory chip manufacturer Kioxia Holdings also experienced substantial losses, with its shares falling more than 12% at one stage.
Meanwhile, SoftBank Group, which has significant exposure to artificial intelligence investments, tumbled approximately 11%.
Other major technology companies, including Advantest, also recorded sharp declines as investors reduced their exposure to semiconductor-related businesses.
The selling followed another difficult session on Thursday, when Advantest shares slumped 15%, Lasertec dropped 14%, and Kioxia lost approximately 13%.
The consecutive declines underline the growing pressure facing Japanese technology companies as global investors reassess the outlook for artificial intelligence demand.
Asian Chipmakers Hit by Global AI Stock Selloff
The market weakness extended beyond Japan, affecting major semiconductor companies across Asia.
South Korean memory chip producer SK Hynix fell approximately 9.02%, while Japanese electronic components manufacturer TDK declined around 7.08%.
Kioxia Holdings was also among the major technology stocks under pressure, recording a decline of approximately 11.73% in one market snapshot before losses deepened during the session.
The synchronized downturn reflected growing concerns about the global semiconductor industry’s dependence on continued investment in artificial intelligence infrastructure.
Technology-heavy equity markets across the region faced increased selling pressure as investors moved away from higher-risk assets.
Wall Street Technology Rout Triggers Wider Market Decline
The sharp fall in Japanese stocks followed a major selloff in US financial markets.
The Nasdaq Composite plunged approximately 5.5% overnight as technology shares experienced another wave of selling.
Meanwhile, the Philadelphia Semiconductor Index declined as much as 12.3%, marking its steepest intraday fall since March 2020.
The substantial losses highlighted growing uncertainty surrounding the outlook for the global semiconductor industry.
US technology companies have attracted considerable investment during the artificial intelligence boom. However, investors are increasingly questioning whether these businesses can deliver returns that justify their high valuations.
As concerns spread across international markets, Japanese semiconductor manufacturers became particularly vulnerable to the changing investor sentiment.
AI Investment Concerns Weigh on Semiconductor Valuations
One of the main factors behind the Nikkei bear market is growing skepticism surrounding the financial returns from artificial intelligence infrastructure spending.
Technology companies have committed enormous amounts of capital to developing AI processors, data centers, and advanced computing systems.
These investments have supported strong growth expectations for semiconductor manufacturers and related technology businesses.
However, investors are now questioning whether future revenue and profitability will be sufficient to justify the scale of spending.
Concerns about elevated market valuations have intensified as technology stocks face renewed pressure.
The uncertainty has encouraged some investors to take profits following earlier gains, contributing to the broader decline in semiconductor shares.
US Political Uncertainty Adds Pressure to AI Stocks
Political developments in the United States have created another source of uncertainty for the technology industry.
Investors are concerned that a Democratic-controlled US Congress could introduce tighter regulatory oversight of artificial intelligence companies.
Potential restrictions affecting AI infrastructure development, particularly the expansion of large data centers, have become an additional market concern.
Any significant changes to the regulatory environment could influence future investment plans across the technology sector.
Although the extent of potential regulatory action remains uncertain, these concerns have added to pressure on semiconductor manufacturers.
The combination of political uncertainty and doubts about AI investment returns has contributed to weaker investor confidence in technology-related equities.
Institutional Selling Accelerates Japan’s Stock Market Decline
Beyond concerns about artificial intelligence, institutional selling has intensified the downturn across Japanese and other Asian financial markets.
Investors have increasingly moved to secure profits from earlier technology stock gains, while some institutional funds have reduced leveraged positions to limit their market exposure.
This process, commonly known as deleveraging, can accelerate market declines when large investors sell holdings simultaneously.
The resulting pressure has been particularly severe in technology-heavy markets, where semiconductor and AI-related companies represent important sources of investor exposure.
Japan’s Nikkei bear market therefore reflects both company-specific concerns and a broader shift in global investment sentiment.
With technology valuations under scrutiny and uncertainty surrounding future AI spending, investors will be closely monitoring semiconductor demand, US market developments, and institutional capital flows.
