The Nikkei fell 1.24% to 42,188.79 as of the close of trading, and earlier dropped more than 2% to the lowest since August
The bulk of the Nikkei’s 530-index point slide was accounted for by drops in two heavyweight stocks: chip-testing equipment maker and Nvidia supplier Advantest plunged 7.9%, or 244 points, while artificial intelligence-focused start-up investor SoftBank Group dropped 4.8%, or 155 points.
The broader Topix, by contrast, declined a more muted 0.39%.
“This seems to me like an exaggerated reaction to Friday’s New York market, which was basically a rebalancing of portfolios at month-end by selling all the stocks that outperformed in August”, primarily the big tech names, said Yunosuke Ikeda, head of macro research at Nomura.
Wall Street’s AI darling, Nvidia, slipped 3.3% on Friday, declining for a second day after earnings following Wednesday’s closing bell disappointed the market’s lofty expectations. Nvidia shares were also weighed down by a Wall Street Journal report that China’s Alibaba, had developed a new chip to compete with Nvidia’s offerings. Alibaba surged as much as 18.8% on Monday in Hong Kong. On Friday, the Philadelphia SE Semiconductor Index dropped more than 3%.
The U.S. markets are closed on Monday for the Labor Day holiday.
Other chip shares leading the Nikkei lower in the latest session included Disco, off 7.7%, Socionext, down 6.3%, and Furukawa Electric, down 5.5%.
With Advantest and SoftBank Group, those stocks made up the bottom five performers on the Nikkei.
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