Nikkei Slips From Record High as the AI Trade Shifts Gears
Key Takeaways
-The Nikkei 225 fell more than 4% from its record high as tech stocks led the retreat.
-The index still posted a roughly 35% quarterly gain, its largest on record.
-Leadership is rotating from chipmakers toward component and power infrastructure names.
-A heavy tech weighting of around 35% keeps the risk of sharp swings elevated.
-Firmer Tokyo inflation has revived bets on further Bank of Japan rate hikes.
-The index still posted a roughly 35% quarterly gain, its largest on record.
-Leadership is rotating from chipmakers toward component and power infrastructure names.
-A heavy tech weighting of around 35% keeps the risk of sharp swings elevated.
-Firmer Tokyo inflation has revived bets on further Bank of Japan rate hikes.
Japan's Nikkei 225 fell more than 4% from its record highs as technology shares drove the pullback. Even after the slide, the index held a gain of around 35% for the quarter, its strongest three-month stretch on record and far ahead of major benchmarks in the US, Europe, and China.
The selloff was sparked partly from overseas. A wave of selling in US megacap tech spread into Asia, while Apple's move to raise device prices on rising chip costs stoked fresh margin concerns. Sentiment weakened further on reports that OpenAI may delay its listing, dragging down key backer SoftBank Group.
What Traders Are Watching?
The rally's character is changing. Early gains came from familiar names like SoftBank and Tokyo Electron, then suppliers such as Fujikura. Now a third wave is lifting the component and power firms that data centres depend on. Murata is up 268% this year and Taiyo Yuden has surged 438%, while Nvidia supplier Ibiden has climbed 292%.
That concentration is also the main risk. Chip-related names make up about 25% of the index, rising to roughly 35% with adjacent firms like Sony included. With the Philadelphia Semiconductor Index trading well above its long-term average, any correction in US chips could quickly weigh on Tokyo. Firmer Tokyo inflation adds to the caution, strengthening the case for more Bank of Japan rate hikes.
Technical Analysis & Key Levels
The Nikkei 225 was rejected near resistance around 72,650 and has formed a potential double top, pointing to a possible reversal lower. A break below the 68,550 support area could open the door to a short-term bearish move.
Momentum is softening, with the moving averages showing a bearish crossover and the MACD forming a bearish histogram. Resistance sits at 72,672, with support at 68,764 and major support at 65,567.
Trading Outlook
Short-term sentiment is fragile as the index reacts to global tech volatility and shifting BOJ expectations. The Nikkei may stay supported if AI earnings hold up and risk appetite stabilises, but deeper profit-taking or a more hawkish BOJ could trigger further consolidation.
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