Nikkei Under Pressure as AI Concerns Weigh on Tech Stocks

The Nikkei 225 index fell 1.3% to 64,075 by the close of trading on Tuesday (October 20), marking its lowest level in a month. The downward pressure stemmed from growing concerns regarding the scale of investment spending on artificial intelligence (AI) and high borrowing costs, which once again weighed on Japanese technology stocks.

The performance of the Japanese market also stood in contrast to the rebound seen on Wall Street during the previous session. Domestic tech stocks continued to face selling pressure as investors questioned the sustainability of the AI ​​investment cycle and its potential impact on corporate valuations.

Several technology stocks recorded significant declines. SoftBank Group was among the hardest hit, falling 6%, while Fujikura dropped 6.5%, Taiyo Yuden fell 5.1%, Kioxia Holdings retreated 3.4%, and Tokyo Electron declined 2.6%.

The pressure also spread to the financial sector. Mitsubishi UFJ weakened by 3.7%, Mizuho Financial fell 5%, and Sumitomo Mitsui retreated 3.9%. This decline indicates that market pressure is not confined solely to the technology sector but is beginning to extend to financial stocks.

Investor attention was also focused on SoftBank Group after the company’s credit-default swap (CDS) spreads climbed to their highest level in nearly four years. This rise reflects growing market apprehension regarding SoftBank’s funding requirements for AI investments, as well as the possibility of the company pursuing major acquisitions.

Newsmaker Analysis: The weakness in the Nikkei suggests that concerns surrounding valuations and the financing of AI investments remain a source of pressure for Japanese equities. If borrowing costs stay high and investors continue to question whether AI investments can generate commensurate returns, technology stocks could face further downward pressure. SoftBank has become a primary focal point due to its significant exposure to the AI ​​ecosystem. (asd)

Source: Newsmaker.id