Sharp drop in AI and chip stocks sends Nikkei down 1,954 yen

2026-07-16

AI and chip stocks under pressure

In Tokyo trading on the morning of the 16th, the Nikkei Stock Average fell sharply, closing 1,954 yen, or 2.84%, lower than the previous day at 66,796 yen. At one point, the decline topped 2,200 yen. Tracking overnight selling in semiconductor memory-related shares on Wall Street, major artificial intelligence (AI) and chip stocks slumped across the board. The previous day had seen renewed buying in related shares after strong results from Dutch semiconductor equipment maker ASML Holding, but the index gave back the 1,508 yen it had gained over the prior two sessions.

Weakness in memory stocks spreads

In the morning, high-priced AI and chip shares including Advantest, Tokyo Electron and SoftBank Group (SBG) weighed on the index. Kioxia Holdings at one point fell more than 15%. The move reflected broader weakness in semiconductor memory-related stocks such as Micron Technology and SanDisk in the US market the previous day.

Expectations for memory prices, which had been supported by demand for AI data centers, are increasingly seen as cooling for now. Concern that a major Chinese semiconductor memory maker will use funds raised in an initial public offering (IPO) to expand production capacity and intensify competition further also added to selling pressure. In the South Korean stock market on the 16th, the KOSPI fell further, adding to the selloff in Japanese semiconductor-related shares.

Rotation continues

In the stock market, investors are also focusing on a shift of funds away from memory-related names. In the US market, buying returned to the so-called M7, seven mega-cap US technology stocks that had been seen as oversold, and Apple hit a record high on the 15th. A decline in memory prices would ease capital spending burdens for hyperscalers, or large cloud service providers.

In Tokyo trading on the 16th, some lagging value stocks such as Toyota Motor and Sony Group were also bought. Japan Tobacco and Saizeriya, which are benefiting from hopes that higher prices will improve profitability, also rose. Easing inflation concerns in the US market the previous day and gains across the three major indexes also provided support, leaving a little over half of the stocks on the Tokyo Stock Exchange Prime market higher.

Caution remains strong

Jun Morita, head of the research department at Chibagin Asset Management, said: 'The rotation in the market remains unchanged, and there is no reason to be pessimistic about Japanese stocks as a whole.' Unlike the Nikkei, the Tokyo Stock Price Index (TOPIX) continues to trade above its 25-day moving average on the chart.

Even so, because AI and chip stocks dominate the index, the Nikkei has little momentum to return to an upward trend. The put-call ratio for the Nikkei, calculated by dividing open interest in puts, or the right to sell, by open interest in calls, or the right to buy, has been rising since late June, when the rally paused, and on the 10th reached 2.15, its highest level since Jan. 8. It is an indicator of market sentiment that rises as bearish traders increase and demand for puts strengthens.

Kioxia Holdings, a stock closely associated with AI semiconductors and prone to influencing market sentiment, fell on the 16th to its lowest level since late May. There are also voices in the market saying caution is warranted against a sell-on-losses spiral driven by investors whose unrealized losses have widened. Taiwan Semiconductor Manufacturing Co. (TSMC) is scheduled to announce quarterly results at 2 p.m. local time on the 16th, or 3 p.m. Japan time. Investors will be watching to see whether, like ASML the previous day, it can help stem selling in semiconductor stocks in Japan, the US and South Korea.

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