Nikkei Plunges, AI-Related Stocks Tumble!

The Japanese stock market faced sharp pressure again during trading on Friday (October 23, 2026), with the Nikkei 225 index sliding 1.6% to around the 61,900 level—marking its lowest point in nearly three months. This decline follows a sell-off in technology stocks on Wall Street in the previous session, driven by growing investor concerns over the high valuations of companies linked to artificial intelligence (AI). Consequently, investors have begun reducing their exposure to riskier equities, shifting instead toward assets perceived as safer.

Technology stocks were the primary drivers of the index's decline, particularly semiconductor firms, memory chip manufacturers, and companies involved in AI development. Shares of Kioxia plummeted 7.6%, SoftBank Group fell 7.5%, Fujikura weakened by 6.8%, Tokyo Electron dropped 6%, and Advantest lost 4.2%. These declines reflect mounting fears that overly optimistic growth expectations for the AI ​​industry could leave tech stocks vulnerable to a correction.

Negative market sentiment was further exacerbated by rising geopolitical tensions in the Middle East. Reports have emerged suggesting that the United States and Israel have prepared plans for potential new strikes against Iran following the U.S. midterm elections this coming November. Concerns regarding a possible expansion of the conflict have prompted investors to seek refuge in assets such as government bonds and the Japanese yen, while dampening appetite for stocks.

Selling pressure also spread to the financial and industrial sectors, though some consumer-sector stocks demonstrated greater resilience. Over the course of this week, the Nikkei index has shed more than 5%, reflecting a deterioration in investor sentiment toward the Japanese stock market. A combination of concerns regarding AI stock valuations, rising geopolitical risks, and global economic uncertainty has made market participants increasingly cautious in taking positions.

Looking ahead, the Nikkei’s trajectory is expected to remain influenced by conditions on Wall Street, developments in the Middle East conflict, and fluctuations in the yen-to-US dollar exchange rate. A strengthening yen could weigh on the earnings outlook for Japanese exporters, while a continued sell-off in technology stocks may exert further pressure on the index. Should negative sentiment persist, the Nikkei risks further decline. Conversely, a stabilization in global technology stocks and a reduction in geopolitical tensions could pave the way for a market recovery.