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Japanese markets extended their slide on Tuesday as the heavy sell-off in technology stocks headed into a second day, driven in part by the overnight plunge in chipmaker Nvidia’s shares.
Nvidia lost $589bn of market value on Monday in a historic fall, as Wall Street and Silicon Valley panicked over a perceived threat from Chinese start-up DeepSeek to the continued dominance of the US in AI and the need to invest hundreds of billions of dollars in underlying infrastructure.
Japan’s tech-heavy Nikkei 225 fell by as much as 1.7 per cent on Tuesday morning in Tokyo, before recovering to a decline of 1.4 per cent. The broader Topix, which has lower weightings for Japan’s tech exporters, was flat.
The US dollar strengthened by 0.6 per cent against a basket of currencies including the Japanese yen and pound sterling following the news that US Treasury Secretary Scott Bessent was pushing to implement “new universal tariffs” starting at 2.5 per cent on US imports.
Futures trading indicated the Nasdaq would open up 0.2 per cent, after falling 3 per cent yesterday. The S&P 500 was set to open flat.
In Hong Kong, shares in Chinese tech companies recorded gains on Tuesday, although chipmaker SMIC closed down 0.4 per cent after falling as much as 2 per cent.
Tokyo-listed shares in SoftBank Group were hard-hit, plunging more than 5.2 per cent in early trading and extending their fall this week to around 12 per cent.
Analysts said SoftBank was especially affected by the overnight 10 per cent plunge in shares of Arm Holdings — the US-listed chip design company in which the Japanese group holds an 88 per cent stake.
Even after this week’s crash, SoftBank shares are more than 43 per cent higher than in August, said Kirk Boodry, an analyst who covers the company at Astris Advisory in Tokyo, noting the stock’s high volatility.
“It looks horrible now, but it’s probably normal for SoftBank,” he said. “It’s another of its round trips, where you get a big bump then it comes down to earth.” Boodry continues to rate the company as a “buy”.
Last week, founder Masayoshi Son, accompanied US President Donald Trump at the unveiling of the Stargate joint venture, involving SoftBank, Oracle and OpenAI in a $100bn data centre investment that they said could stretch to $500bn over four years.
DeepSeek’s promise of a much lower-cost AI model has raised the question of whether Son’s photo-op announcement “marked the peak of the AI capex boom”, said Jefferies strategist Chris Wood.
The selling in Tokyo was focused on Disco, Advantest and Furukawa Electric — stocks that had soared in recent months on the expectation of expanding demand for high-end chips and data centres to power artificial intelligence.
Shares in Disco and Furukawa were down 3.2 per cent and 8 per cent respectively on Tuesday. Nvidia supplier Advantest plunged over 10 per cent in the first 20 minutes of trading.
The sell-off expanded to include companies such as Mitsubishi Heavy Industries, Hitachi and Kawasaki Heavy Industries. Until recently, they had traded higher on the bet that they would benefit from higher overall investment in AI-linked electricity infrastructure.
“If you are in tech hardware you got hammered yesterday”, said Prashant Bhavani, chief investment officer at BNP Paribas wealth management.
“The move into other parts of the market will continue — that will also wake up people for portfolio diversification, which wasn’t needed over the last two years where you just had to own [the Magnificent] seven [Big Tech] stocks.”
Hong Kong’s Hang Seng benchmark closed up 0.2 per cent on Tuesday, led by mainland Chinese tech companies including Tencent, Alibaba and Baidu.
South Korea and Taiwan are closed for the lunar new year holiday.
