Japan’s Nikkei falls as investors book profits on technology stocks

Japan’s Nikkei stock fell on Friday as technology shares followed Wall Street peers’ overnight losses amid growing concerns about sky-high valuations. The Nikkei fell 1.8% to end the day at 50,376.53. The broader Topix lost 0.7% to 3,359.81.

Artificial intelligence-linked companies led the decline, with chip testing equipment maker Advantest down 5.5%, start-up investor SoftBank Group down 6.6% and chip testing equipment maker Tokyo Electron down 6.1%.Stocks linked to data center expansion also fell, with Hitachi and Fujikura down 5% and 6.4% respectively.

“It appears investors are taking profits on these AI-related stocks” as concerns about rising valuations simmer, said Fumika Shimizu, a strategist at Nomura Securities.

“We’re seeing a bit of sector rotation,” especially among companies that have posted strong gains this season, she added. Paper company TOPPAN Holdings rose 14% and property developer Tokyo Tatemono rose 10.4% on robust financial results, becoming the Nikkei’s two biggest percentage gainers on the day. The majority of the Nikkei’s 225 components won, with 121 advancers versus 101 decliners. Three ending flat.

The Nikkei rose 0.2% this week and was held up by Monday’s 1.3% rally, allowing the index to regain some of last week’s more than 4% decline.

Valuation concerns surrounding the AI ​​story have led to tumbling global stock prices all month.

There could be a flashpoint next week, with AI whistleblower Nvidia reporting earnings on Wednesday.