# Nikkei Plunges 4% as Wall Street AI Sell-Off Hammers Asia Chip Stocks > Source: > Published: 2026-07-17 12:51:19.836237+00:00 # Nikkei Plunges 4% as Wall Street AI Sell-Off Hammers Asia Chip Stocks - Japan's Nikkei 225 fell 4% to 64,141, entering correction territory more than 10% below its June 25 peak, with a combined two-day loss exceeding 4,400 points [[1]](https://finance.biggo.com/news/b9fb7316-ff36-4c41-8162-7f93ee338b3d) - SoftBank dropped 9%, Kioxia plunged 16%, Tokyo Electron lost 9%, and Advantest declined 9.4% as the sell-off spread across Asia's semiconductor sector [[2]](https://www.newsbeep.com/us/767511/) - The rout followed a 1.47% decline in the Nasdaq Composite and a nearly 4% drop in the VanEck Semiconductor ETF on Wall Street, where Arm, Micron, AMD, and Broadcom each fell over 5% [[3]](https://www.cnbc.com/2026/07/16/stock-market-today-live-updates.html) - Kioxia has lost 44% of its value in a single month after surging over 600% since January, erasing approximately $185 billion in market capitalization [[4]](https://finance.yahoo.com/markets/stocks/articles/nikkei-bleeds-kioxia-boom-bust-031605544.html) - TSMC fell 3.6% despite posting record quarterly profit, as investors treated strong earnings as a 'sell-the-fact' trigger amid concerns about AI spending sustainability [[2]](https://www.newsbeep.com/us/767511/) Japan's Nikkei 225 plunged 4% on Friday to close at 64,141, entering official correction territory — more than 10% below its June 25 peak — as a brutal sell-off in U.S. semiconductor stocks spread across Asian markets. The two-day rout wiped more than 4,400 points off the benchmark index, its steepest decline in four months [1]. SoftBank Group fell 9%, dragged down by its heavy exposure to AI infrastructure through its majority stake in Arm Holdings, which had dropped over 5% in New York the prior session. Chip-equipment makers Tokyo Electron and Advantest each lost roughly 9%, while memory chipmaker Kioxia plunged 16% — extending a devastating reversal that has erased 44% of its market value in a single month [[2]](https://www.newsbeep.com/us/767511/) [4]. The contagion extended beyond Japan. Taiwan's Taiex shed 4%, with TSMC retreating 3.6% despite posting record quarterly profit a day earlier. South Korea's SK Hynix closed over 11% lower. In China, AI-adjacent names including Kuaishou, Meituan, and Alibaba all declined [[2]](https://www.newsbeep.com/us/767511/) [3]. The sell-off originated on Wall Street, where the Nasdaq Composite fell 1.47% on Thursday and the VanEck Semiconductor ETF dropped nearly 4%. Arm Holdings, Micron Technology, AMD, and Broadcom each lost more than 5%, while SK Hynix's U.S.-listed shares slumped over 13% [3]. ## What Triggered the Rout The immediate catalyst was a paradoxical 'sell-the-fact' reaction to TSMC's earnings report. The world's largest contract chipmaker posted a sharp jump in quarterly profit that topped market expectations, but its raised capital expenditure guidance — to $60–64 billion from $52–56 billion — amplified concerns that the industry's AI investment cycle has become unsustainably aggressive [[2]](https://www.newsbeep.com/us/767511/) [5]. On Wall Street, the VanEck Semiconductor ETF (SMH) dropped nearly 4% on Thursday, with losses concentrated in AI infrastructure names. Arm Holdings fell over 5%, while Micron, AMD, and Broadcom each shed more than 5%. The Nasdaq Composite declined 1.47%, extending a broader rotation out of richly valued technology shares [3]. The sell-off hit Tokyo from the opening bell on Friday, with profit-taking orders flooding the market. Approximately 70% of listed issues declined, with the heaviest losses in electrical machinery, precision instruments, and information and communications sectors [1]. ## Kioxia's Spectacular Reversal No stock illustrated the violence of the unwind more than Kioxia Holdings. The memory chipmaker, which had surged over 600% since January and briefly became Japan's most valuable company in mid-June, plunged 16% on Friday alone. The stock has now lost 44% of its value in a single month, erasing approximately ¥30 trillion ($185 billion) in market capitalization [4]. Several factors compounded Kioxia's decline: Bain Capital exited its entire position in the company — widely interpreted as a peak-cycle signal — while signs emerged that global memory prices are stabilizing after a period of sharp increases. Increased scrutiny of Chinese memory chipmakers added to the overhang [4]. Heavy leveraged positions held by Japanese retail traders, who had piled into the AI trade in recent months, accelerated the downturn as margin calls forced liquidations [4]. ## Why It Matters The correction marks a significant inflection point for the global AI infrastructure trade, which had propelled semiconductor stocks to historic valuations over the past 18 months. The Nikkei's slide into correction territory — defined as a 10% decline from a recent peak — signals that investor skepticism about AI monetization timelines has reached a critical mass [[1]](https://finance.biggo.com/news/b9fb7316-ff36-4c41-8162-7f93ee338b3d) [5]. SoftBank's 9% drop is particularly notable given CEO Masayoshi Son's aggressive pivot toward AI, including the company's majority ownership of Arm Holdings and a series of large-scale AI infrastructure commitments. The stock's decline reflects broader market unease about the returns on the hundreds of billions being poured into AI data centers, chips, and related infrastructure [2]. Strategists noted that investors are increasingly questioning whether the aggressive capital expenditure cycle can be justified by actual AI revenue generation. While companies like TSMC continue to report strong earnings, the gap between infrastructure investment and downstream AI monetization is widening [5]. ## What's Next Market participants are watching for signs of whether the sell-off represents a healthy correction within a secular AI growth trend or the beginning of a more prolonged downturn. Some investors view the pullback as a buying opportunity, arguing that the medium-to-long-term growth narrative for AI remains intact [1]. However, caution persists. One analyst noted that the adjustment phase 'could continue for some time yet' given uncertainty around interest rate trends and concerns about AI monetization delays. The rotation out of richly priced chip stocks toward underperforming sectors suggests the market's risk appetite has shifted meaningfully [[1]](https://finance.biggo.com/news/b9fb7316-ff36-4c41-8162-7f93ee338b3d) [4]. U.S. futures pointed to continued weakness heading into Friday's Wall Street session, with Nasdaq futures falling 2% in pre-market trading, suggesting the global sell-off has further to run [3]. ## Companies mentioned ## Further sources [[1] BigGo Finance — Nikkei 225 Plunges Over 2,500 Points; AI and Semiconductor Sell… ↗](https://finance.biggo.com/news/b9fb7316-ff36-4c41-8162-7f93ee338b3d) [[2] NewsBeep — SoftBank sinks as Asia chip stocks track Wall Street AI rout ↗](https://www.newsbeep.com/us/767511/) [[3] CNBC — Nasdaq futures fall 2% as global chip sell-off continues ↗](https://www.cnbc.com/2026/07/16/stock-market-today-live-updates.html) [[4] Yahoo Finance — As Nikkei Bleeds, Kioxia's Boom-to-Bust Highlights Dangers of T… ↗](https://finance.yahoo.com/markets/stocks/articles/nikkei-bleeds-kioxia-boom-bust-031605544.html) [[5] Bloomberg — Japan's Nikkei 225 Enters Correction on Fears AI Rally Overdone ↗](https://www.bloomberg.com/news/articles/2026-07-17/japan-s-stocks-dive-as-investors-worry-about-ai-rally-s-run-mro83xih) The stories that matter, in one email. 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