Tokyo's Nikkei Tumbles Into a Correction as the Global AI Trade Buckles

TOKYO — Japan's stock market plunged into correction territory as a global retreat from artificial-intelligence shares hammered Tokyo's chip and technology giants, deepening anxiety that the year's frenzied AI rally has run ahead of reality.

The benchmark Nikkei 225 closed down 2,694.42 points, or 4.03%, at 64,141.12, after sliding as much as 6.18% during the session to an intraday low of 62,704.60. The close left the index more than 11% below the record high it set in June, meeting the common definition of a market correction. The broader selloff rippled across Asia and tracked declines on Wall Street, where AI-linked stocks have wobbled for weeks.

Leading the rout was Kioxia Holdings, one of the world's largest makers of flash-memory chips, which cratered 16.10% as investors unwound leveraged bets on the sector. Other suppliers central to the AI supply chain followed: silicon-wafer maker Sumco fell 15.17% and chip-equipment firm Screen Holdings dropped 12.04%. The concentration of losses in memory and semiconductor-equipment names underscored how heavily Japan's market has come to rely on the AI story.

Analysts said the sell-off reflected mounting doubts about whether the enormous demand for AI processors and memory can be sustained — and whether the technology will ultimately deliver the profits and productivity gains that investors have priced in. After a year in which chipmakers powered global indexes to records, some money managers have begun trimming exposure, wary that valuations climbed faster than earnings could justify.

The pullback carries outsized stakes for Japan, whose export-heavy market has ridden the AI wave to historic highs and whose corporate giants are woven into the manufacturing backbone of the world's data centers. A sustained downturn in chip demand would reverberate through suppliers, equipment makers, and the small army of firms that feed the industry.

The turbulence also complicated the picture for Japan's central bank, which has spent recent years cautiously normalizing policy after decades of ultra-loose settings. A sharp equity sell-off can ripple into the yen and into corporate confidence, and policymakers in Tokyo — like their counterparts at the U.S. Federal Reserve, where markets expect no rate change at the coming meeting — are watching whether the AI-driven volatility hardens into something more durable.

Investors now turn to earnings reports from major technology companies for signs of whether AI spending remains robust or is beginning to cool. For markets that have leaned so heavily on a single theme, the week's slide was a reminder of how quickly sentiment can turn — and how much of the global rally rests on the belief that the AI build-out still has room to run.