Japan's Nikkei slumps 5 percent as tech stocks hammered by AI, rate hike worries

Japan's Nikkei share average tumbled nearly 5 percent on Thursday, with tech stocks hit hard by media reports about distressed debt at US cloud-computing provider CoreWeave, while hot US inflation figures sparked fears of higher interest rates.

The tech-heavy Nikkei ended the day down 4.9 percent at 64,425.95. The broader Topix fell 2.4 percent.

Selling was concentrated among AI-linked stocks, with chip equipment makers Advantest and Tokyo Electron sliding 15 percent and 7.8 percent, respectively. AI-focused startup investor SoftBank Group skidded 9.3 percent.

The market failed to draw any support from Taiwanese chipmaker TSMC's 2330.TWrecord earnings, which came late in the Tokyo session.

Overnight, a hotter-than-expected US CPI reading stoked bets that the Federal Reserve will need to raise rates earlier and keep them elevated longer, taking a toll on the highly leveraged tech sector. The US Nasdaq Composite.IXICslumped 1.9 percent on Wednesday.

CoreWeave plunged more than 15 percent, even after the company's CEO said in an employee memo that its deal backlog is large enough to cover its debt obligations.

"Concerns have been raised that the financial health of AI-related companies may be deteriorating," said Nomura strategist Wataru Akiyama. "Consequently, concerns regarding AI capital expenditure and the profitability of the AI business have risen rapidly."

A standout winner on the day was pharmaceuticals, which was the Tokyo exchange's best-performing industry group., climbing 4 percent as investors rotated into the traditionally defensive sector. Sumitomo Pharma was the Nikkei's biggest percentage gainer, up 15.8 percent.

Of the Nikkei's 225 components, 136 fell versus 87 that rose, with two ending flat.

Reuters

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