Nikkei falls 2.8% as Amazon and Intel results hit AI chip stocks

The trigger came from Wall Street rather than Tokyo. Amazon and Intel reported quarterly results after the close that showed heavy cash consumption, and Intel's guidance fell well short of expectations; Intel shares fell more than 20% in after-hours trading, while Amazon missed on both revenue and profit, reinforcing concerns about negative free cash flow. Alphabet's results earlier in the week had already unsettled investors with fresh questions about returns on AI spending, and Nasdaq 100 futures fell more than 2% during Asian hours, setting the tone for the region.\n\nWithin Japan, the damage was concentrated in semiconductor manufacturing equipment and AI-related names, with Advantest, a key supplier to Nvidia, among the hardest hit. Nomura Securities equity strategist Maki Sawada said the move appeared to reflect growing concern over the profitability of AI investment, weighing on share prices and leaving Japanese stocks exposed to the decline in US tech shares. Not every stock was sold: 123 of the 225 Nikkei constituents fell, 100 rose and 2 were unchanged. Konami Group surged 15.3% on its results and Oriental Land rose 6.6%, while falling crude oil prices, driven by optimism over Middle East peace talks, offered some support given Japan's heavy dependence on energy imports.\n\nThe pressure on Japanese equities is twofold. Globally, the AI reassessment strikes directly at the country's semiconductor equipment champions that dominate the Nikkei. Domestically, the BOJ's move toward further rate hikes and a reduction in ETF holdings would remove two supports that have underpinned the market through its long rally. With Tokyo inflation at 2.6%, the case for additional tightening is strengthening, and equity investors must weigh that against the earnings power of Japan's technology exporters.