AI and chip stocks sold in Tokyo; Nikkei briefly drops over 1,700 points
2026-07-07
On the Tokyo stock market on the 7th, the Nikkei average extended its sharp losses, at one point falling more than 1,700 points. It also briefly came close to slipping below 68,000. Samsung Electronics of South Korea released its preliminary earnings for the April-June 2026 quarter early in the day, but despite results that topped market forecasts, the stock price reaction was muted.
Buying fails to return even after Samsung results
Takehiko Masuzawa, head of trading in the equities division at Phillip Securities, said, 'Samsung's results beat prior expectations, so I thought the momentum for buying artificial intelligence and semiconductor stocks would return, but investors were disappointed.'
For Samsung's April-June quarter, consolidated revenue was 171 trillion won, 2.3 times a year earlier, or about 18 trillion yen, while consolidated operating profit was 89.4 trillion won, 19 times higher, or about 9 trillion yen. Both were record highs for the third straight quarter, and operating profit also exceeded market expectations.
Even so, selling dominated in the South Korean stock market, and Samsung shares at one point fell as much as 10%. SK Hynix, which is scheduled to list American depositary receipts on the US Nasdaq market on the 10th, also fell more than 10%, and the Korea Composite Stock Price Index (KOSPI) also extended its sharp decline.
Backlash to overly high expectations spreads
Sell orders also spread among AI and semiconductor-related shares in Tokyo. Kioxia Holdings started with no bid and at one point fell 13%. In terms of intraday market capitalization, it was overtaken by Mitsubishi UFJ Financial Group and slipped to third place. Taiyo Yuden and Ibiden also fell sharply.
Expectations that the AI rally would regain momentum on the back of quarterly results from individual companies faded for the moment. Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management, said, 'The results were not bad, but market expectations were high and profit-taking came first.'
US memory chip giant Micron Technology announced late-June results for its March-May quarter, with revenue 4.5 times higher than a year earlier and above market forecasts. Its shares surged on the news, and some market participants say that may have pushed the bar for valuations even higher.
Daiki Takei, a strategist at Resona Holdings, said, 'Samsung's results showed that unless they beat market forecasts by a considerable margin, there is no spillover effect to surrounding stocks.' He believes earnings per share, or EPS, for AI and semiconductor-related stocks have risen rapidly, but a further acceleration in profit growth is needed to support higher valuations. 'As scale expands globally and growth rates slow, the market lacks conviction,' Takei said.
Room remains for buying on dips
Even so, some Japanese semiconductor-related companies are still issuing conservative earnings outlooks. Kazuaki Shimada, chief strategist at IwaiCosmo Securities, said upward revisions to earnings would help support share prices.
With the correction so far, Kioxia and Taiyo Yuden have fallen more than 30% from their highs. Some see that as creating opportunities to accumulate related shares on dips if quarterly results confirm strong progress.
The Samsung results again highlighted the market's lofty expectations, but the growth story investors are envisioning has not been broken. Many investors still want to buy on weakness, and on this day in Tokyo, Tokyo Electron briefly turned higher in morning trading. The view still dominates that the seeds for an AI rally revival remain intact.
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