Nikkei Slips Below 63,100 as Kioxia Outlook and Wall Street Tech Rout Rattle Japan's Chip Stocks Again

TOKYO — Japanese stocks edged lower on Monday, as a steep sell-off in U.S. technology shares and a disappointing profit outlook from memory chipmaker Kioxia weighed on semiconductor-related stocks.

The Nikkei 225 index was down 230.82 points, or 0.36%, at 63,059.29 in late afternoon trading. The index had fallen as much as 0.7% early in the session before paring losses.

The broader Topix index was down about 0.8% in early trading.

Chip stocks lead decline

Technology shares took the biggest hit, following a sharp drop in their U.S. peers on Friday. Chip-related stocks Ibiden and Sumco were among the biggest decliners on the tech-heavy Nikkei.

Kioxia, Japan's largest maker of NAND flash memory, was set to fall after issuing a disappointing profit outlook. The company has been one of the biggest beneficiaries of the AI boom, as demand for storage in data centers has driven soaring memory prices.

Kioxia's results have been closely watched as a signal of the health of the memory market. Earlier this year, the company reported record profits and said its entire 2026 NAND production was already sold out. Analysts at Morningstar recently said a sell-off triggered by expectations of softer memory price increases looked overdone, noting that NAND remains in deep shortage.

Following Wall Street lower

Friday's sell-off on Wall Street set the tone for Asian markets. U.S. technology stocks tumbled as investors cut exposure to AI-related companies amid renewed concerns about heavy capital spending and uncertain returns.

The S&P 500 fell 1.82%, while the tech-heavy Nasdaq dropped about 3.5%.

Concerns intensified after Alphabet, Google's parent company, suffered a historic share price slump last week. Amazon also reported much higher-than-expected capital spending.

Extending Friday's losses

Monday's decline added to a sharp drop at the end of last week. On Friday, the Nikkei fell 1,505 points, or 2.33%, to close at about 63,154, led by declines in Fujitsu, Murata Manufacturing and Lasertec.

The Nikkei has pulled back into a technical correction, falling about 13% from its high this year. Over the past month, the index has dropped about 10%, though it remains about 22% higher than a year ago.

The index soared to record highs earlier this year on enthusiasm for AI-related stocks, with major constituents including Tokyo Electron, Advantest, Kioxia and Murata closely tied to the global semiconductor supply chain.

AI jitters dominate

Analysts say the Nikkei is particularly vulnerable to swings in AI sentiment because many of its largest components are chip and electronics companies.

Recent concerns about funding pressures in the AI industry and questions about the returns on massive investments have weighed on these stocks.

Energy concerns

Investors are also watching tensions in the Middle East. Oil prices eased in Asian trading on Monday as talks mediated by Qatar raised hopes of reopening the Strait of Hormuz, though fresh attacks on Gulf shipping tempered relief.

Japan imports most of its energy, making its economy and stock market sensitive to oil price swings.

Holiday break

Japanese markets will be closed on Tuesday for Culture Day, a national holiday, giving investors a pause before trading resumes Wednesday.

The break comes during a busy week for global markets, with the U.S. midterm elections on Tuesday and a series of key earnings reports, including from Japanese companies.

What's next

Investors will be looking to upcoming earnings from Japanese technology and electronics companies for clues about the strength of AI-related demand. Kioxia is scheduled to release its next quarterly results later this month.

The direction of U.S. technology shares and the yen will also shape the Nikkei's moves in the days ahead.