Japan's Nikkei posts lowest close in more than two months on chip selloff

"The Nikkei fell because AI-related stocks were heavily sold off, but this has nothing to do with the fundamentals of Japan's economic outlook," said Koji Toda, senior fund manager at Resona Asset Management.

"Once investors see a firm outlook of big technology firms in Japan and the United States later this week, they would buy back stocks."

Overnight, Nvidia NVDA.O fell 4.9% and the Philadelphia semiconductor index .SOX extended its recent selloff, falling 2.2%. The index is down 21% from its record-high close on June 22, but up 63% in 2026.

South Korea's benchmark KOSPI .KS11 plunged more than 10% on Tuesday.

The Nikkei's moves have been heavily influenced by the tech-heavy KOSPI and the U.S. Philadelphia semiconductor index.

Memory chip maker Kioxia 285A.T fell 18.33% to a daily limit low of 44,550. Chip-related Advantest 6857.T and Tokyo Electron 8035.T dropped more than 10% each.

The Nikkei has declined more than 14% since hitting a record high in mid-June as concerns over global technology firms' aggressive AI spending weighed on local chip-related shares.

Investors had been shifting money to value stocks, such as banks, which had been rising on prospects of an early Bank of Japan interest rate hike.

On Tuesday, bank shares fell, with Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T losing more than 3% each.

Retailers rose, with Pan Pacific International Holdings 7532.T and Seven & i Holdings 3382.T both up more than 3%. Game maker Nintendo 7974.T climbed 3.07%.

Of the more than 1,500 stocks trading on the Tokyo Stock Exchange's prime market, 30% rose, 67% fell and 1% traded flat.