Nikkei 225 Slides Nearly 3% as Kioxia and SoftBank Lead Japan Tech Selloff

Key Takeaways

• Japan’s Nikkei 225 fell about 2.8% on Friday morning as semiconductor and AI-related stocks extended their selloff.
• Kioxia shares briefly traded near ¥52,000, while SoftBank Group dropped more than 8%.
• The decline followed a 4.3% overnight fall in the Philadelphia Semiconductor Index.
• Investors continued to reduce exposure to highly valued AI and chip stocks after recent earnings failed to meet elevated market expectations.
• South Korea’s stock market was closed for the restored Constitution Day public holiday.
• Renewed US-Iran tensions and rising oil prices added to the broader risk-off mood.

Japanese Stocks Fall as Semiconductor Selloff Deepens

Japanese stocks extended their losses on Friday, July 17, as renewed selling in semiconductor and artificial intelligence shares weighed heavily on the country’s technology-focused market.

The Nikkei 225 fell approximately 2.8% during morning trading, building on a decline of almost 3% in the previous session. The broader weakness reflected growing caution toward chipmakers after a sharp overnight drop in US semiconductor stocks.

Selling pressure was particularly severe among companies that had previously benefited from expectations of continued AI infrastructure spending. Kioxia Holdings, SoftBank Group, Advantest and Tokyo Electron were among the largest decliners.

The move formed part of a broader shift away from high-growth technology shares and into sectors with lower valuations or more stable earnings. Concerns are increasing that the market may already have priced in several years of strong AI-related demand, leaving chip stocks vulnerable when earnings or guidance merely meet expectations rather than significantly exceed them.

Kioxia Shares Slump as Investors Cut AI Exposure

Kioxia was one of the worst-performing Nikkei 225 constituents during the session.

The Japanese memory-chip producer opened at ¥55,900 before falling as low as approximately ¥52,100. At one stage, market data showed the stock down by around 15%, although it later recovered part of the decline.

The latest fall has pushed Kioxia substantially below its June record high of ¥112,700. Despite the sharp correction, the stock remains highly sensitive to expectations surrounding NAND flash memory prices, data-centre investment and demand for storage products used in AI infrastructure.

Kioxia’s decline also reflects its exceptionally strong performance earlier in 2026. Rapid gains had lifted both the company’s valuation and investor expectations, increasing the risk of sharp downward moves when sentiment toward the semiconductor sector deteriorates.

Other Japanese chip-related shares also came under pressure. Advantest dropped by around 10%, while Tokyo Electron and Murata Manufacturing recorded steep losses as selling spread across the technology supply chain.

SoftBank Stock Drops More Than 8%

SoftBank Group shares fell for a third consecutive session, extending a reversal from their recent highs.

The technology investment company traded near ¥5,400 during the session, down more than 8% from the previous close of ¥5,961. The stock had traded between roughly ¥5,390 and ¥5,676 by late morning.

SoftBank has become an important indicator of Japanese investor sentiment toward AI because of its exposure to Arm Holdings and other technology investments. Its share price has also been supported by expectations surrounding the expansion and eventual public listing of major AI companies.

However, that exposure can amplify losses when investors become less willing to pay premium valuations for AI-related assets. The latest decline erased much of SoftBank’s recent rebound and added significant downward pressure to the price-weighted Nikkei 225.

US Semiconductor Weakness Spreads to Asian Markets

The Japanese selloff followed another difficult session for US technology stocks.

The Philadelphia Semiconductor Index fell 4.3% on Thursday, marking its second consecutive decline. The Nasdaq Composite lost about 1.5%, while the S&P 500 slipped 0.5%.

The downturn came despite TSMC reporting strong earnings growth. Investors appeared to conclude that the company’s results were not sufficient to justify the elevated valuations already embedded across the wider semiconductor sector.

This reaction highlights the increasingly demanding environment facing AI-related companies. Strong revenue growth may no longer be enough to support share prices when valuations already assume exceptional long-term expansion.

Japan is especially exposed to this shift because the Nikkei includes several major semiconductor equipment manufacturers, component suppliers and technology investment companies. When US chip stocks decline sharply, the negative sentiment frequently carries into the next Asian trading session.

South Korean Market Closed for Constitution Day

South Korea’s KOSPI and KOSDAQ markets did not open on Friday because the country observed Constitution Day.

July 17 was restored as a statutory holiday in 2026 and added to the Korea Exchange’s regular list of non-trading days. The closure was therefore unrelated to weather conditions or market volatility.

The holiday came after the technology-heavy KOSPI fell more than 6% during the previous session, when Samsung Electronics, SK Hynix and other semiconductor shares were caught in the regional technology selloff.

South Korean regulators also announced measures intended to reduce volatility in technology-linked exchange-traded products, including restrictions on certain new ETF listings and higher minimum deposit requirements for retail investors.

Weak Yen Fails to Support Japanese Exporters

Currency movements did not provide meaningful relief for the Japanese market.

Contrary to claims that a stronger yen was hurting exporters, the Japanese currency remained close to a 40-year low at approximately ¥162.38 per US dollar. Japanese officials renewed verbal warnings about excessive currency movements as intervention concerns returned.

A weak yen would normally support companies such as Toyota and Honda by increasing the value of overseas earnings when converted into yen. However, that potential benefit was overshadowed by the wider equity selloff, rising energy costs and uncertainty surrounding global trade.

The currency’s continued weakness may also create a separate risk. A sudden intervention by Japanese authorities could strengthen the yen quickly, potentially increasing volatility in exporter shares and global carry trades.

Middle East Tensions Add to Risk-Off Sentiment

Renewed fighting between the United States and Iran added another source of uncertainty for global markets.

The United States conducted a new wave of strikes against Iranian targets on Thursday, while concerns persisted about potential disruption to energy infrastructure and shipping routes. Brent and US crude oil futures were heading for weekly gains of more than 11%, their strongest increases since April.

Higher oil prices are particularly challenging for Japan, which imports most of its energy requirements. A prolonged increase in crude prices could raise corporate expenses, weaken consumer purchasing power and complicate the Bank of Japan’s inflation outlook.

The combination of elevated technology valuations, rising energy prices and geopolitical uncertainty encouraged investors to reduce risk rather than buy the market dip.

What Could Move the Nikkei 225 Next?

Near-term direction for the Nikkei 225 is likely to depend heavily on whether US semiconductor stocks stabilise.

Continued weakness in Nvidia, Micron and the Philadelphia Semiconductor Index could keep pressure on Kioxia, Advantest, Tokyo Electron and SoftBank. Conversely, a rebound in US chip shares may provide temporary support when Japanese markets reopen next week.

Investors will also monitor oil prices, developments in the Middle East and any indication that Japanese authorities are preparing to intervene in the currency market.

After the Nikkei’s strong AI-driven rally earlier in 2026, the current decline suggests that investors are reassessing how much future semiconductor growth is already reflected in share prices. Volatility may remain elevated while that price-discovery process continues.