Rebound selling hits AI chip stocks as Nikkei briefly tops 63,000

2026-07-29

Morning rebound

The Nikkei Stock Average fell for a second straight session in Tokyo on the 29th, at one point dropping to the 60,500-yen range, more than 1,800 yen below the previous day. It opened higher after a drop of more than 2,500 yen on the 28th, but was gradually hit by profit-taking after SK Hynix's earnings in South Korea. Investors are still watching to see when the correction in artificial intelligence (AI) and semiconductor-related shares will run its course.

The Nikkei opened firmer and at one point rose more than 700 yen from the previous day to climb above the key 63,000-yen level. The downside deviation from the 25-day moving average was 8% as of the 28th, above the 5% level that is generally seen as oversold, prompting some to view it as a buying opportunity.

SK Hynix earnings weigh

The rally did not last, and the morning close was 61,689.86 yen, down 675.06 yen, or 1.08%, from the previous day. SK Hynix's earnings for April-June 2026, released before the start of trading on the 29th Japan time, showed operating profit of 60.5426 trillion won, 6.6 times higher than a year earlier and a record quarterly high, but below market expectations of 64.661 trillion won. On the view that the results fell short of expectations, the company's shares were sold down as much as 12% after opening higher.

In the South Korean stock market on the 29th, the benchmark KOSPI briefly fell more than 8%, triggering circuit breakers that halted trading for the second consecutive day. It was the ninth time this year. Kioxia Holdings, whose moves have become increasingly linked, also reversed after opening higher, falling more than 11% at one point and slipping below the key 40,000-yen level. From its all-time high reached in June, the stock was down more than 60%.

Caution over AI investment persists

The volatile swings in memory stocks reflect investors' lack of confidence over where the correction in AI and semiconductor-related shares will stop. With earnings announcements from major companies approaching, some also see the near-term pullback as still insufficient. Concerns over excessive investment in AI remain strong, and in earnings announced last week for April-June 2026, Alphabet's decision to raise its capital spending plan for the current fiscal year heightened caution over the burden of investment and led to a sharp selloff in its shares.

Hiroshi Namioka, chief strategist at T&D Asset Management, said that with the market strongly opposed to higher capital spending, 'it cannot be ruled out that this could also have a negative impact on decision-making by semiconductor makers for AI and related companies.' Earnings announcements are also due on the 29th from U.S. technology firms including Microsoft and Meta Platforms, and Namioka said investors remain 'skeptical that shares will rise after earnings.'

Earthquake adds pressure

The earthquake that recorded a maximum seismic intensity of 7 in Kumamoto Prefecture on the 28th also dampened investor sentiment. Tokyo Electron said on the 28th that it would suspend operations at its Kumamoto facility and conduct safety inspections. It said no major damage had been confirmed to buildings or equipment at this point, but concerns over the impact on corporate activity kept the stock under selling pressure throughout the session, leaving it down 9%. The timing of a full-bottoming in Japanese stocks remains difficult to gauge.

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