Nikkei Falls as Nvidia Caution Hits Chip Shares

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Hits Chip Shares Aug 25, 2026 | News On Japan TOKYO - Tokyo stocks fell on August 25, with the Nikkei 225 closing at

64,980.53, down 0.8%, as investors sold semiconductor and electronics shares ahead of Nvidia’s earnings while a weak

yen, elevated bond yields and renewed U.S. pressure on Iran kept risk appetite subdued. The broader market was firmer

than the Nikkei, with TOPIX supported by financials, transport, shipping, communications and selected domestic-demand

shares. The split again showed how sharply the Nikkei is being influenced by a narrow group of high-priced technology

and artificial intelligence-related components. The Nikkei opened lower after U.S. technology shares weakened overnight

and the Nasdaq fell. Semiconductor and electronics names led the decline, reflecting caution before Nvidia’s May-July

earnings, which investors see as the next major test of global AI demand. Nikkei CNBC-style market commentary centered

on the same issue that has dominated Tokyo trading since late July: the AI trade still has strong long-term support, but

investors are no longer willing to buy the theme indiscriminately. The market is demanding clearer evidence of orders,

margins, capital-spending discipline and returns on investment. Reuters reported that analysts expect Nvidia’s

quarterly revenue to almost double to around $92 billion, with full-year earnings guidance seen around $103 billion to

$105 billion. Those expectations are so high that even strong results may not be enough if investors see weakness in

margins, data-center guidance or the sustainability of AI-related demand. Japanese chip shares were sold in advance of

that event. Kioxia Holdings fell 2.8%, Advantest dropped 3.6% and Panasonic Holdings declined 4.0%, according to Dow

Jones market data. Their weakness weighed on the Nikkei and reinforced the market’s sensitivity to the global

semiconductor cycle. Kioxia remains one of Tokyo’s clearest gauges of confidence in AI servers, high-bandwidth memory

and data-center demand. The memory-chip maker has been extremely volatile since July, and its decline on August 25

showed that investors are still reducing risk before key overseas earnings. Advantest also remained under pressure. The

chip-testing equipment maker is one of the Nikkei’s most important AI-related components because of its large index

weighting and direct exposure to advanced semiconductor demand. Its decline showed that investors remain cautious toward

stocks whose valuations depend heavily on continued expansion in AI chip production. Panasonic’s fall reflected

weakness in electronics and battery-related shares. The company is tied to several themes investors have favored this

year, including advanced batteries, industrial devices and power systems, but the stock remains vulnerable when

investors reduce exposure to technology supply chains. Tokyo Electron, SCREEN Holdings, Lasertec, Ibiden, Murata

Manufacturing, Fujikura and Furukawa Electric remained closely watched as investors assessed whether the selloff would

spread from chip-testing and memory into semiconductor equipment, components and data-center infrastructure. The

second-wave AI infrastructure names have been an important source of support for Japanese equities this year. Optical

fiber, power cables, advanced packaging, substrates, electronic components and energy systems are essential to larger

and more power-hungry data centers. However, their valuations have also become more sensitive to any sign that global AI

spending expectations are too high. SoftBank Group also remained central to the Nikkei’s direction because of its

large index weighting and its role as a proxy for global AI investment sentiment. Investors continue to weigh the

company’s exposure to OpenAI, robotics and digital infrastructure against the funding demands and debt risks created

by its strategy. The broader market’s relative resilience showed that investors were still willing to buy Japan

outside the most crowded AI trades. Transport, communications, shipping, financials and selected consumer shares helped

support the market, indicating that rotation remained active beneath the Nikkei’s headline decline. Banks and insurers

remained tied to expectations for further Bank of Japan normalization. Higher interest rates can improve lending margins

and investment income, but the recent rise in government bond yields has also increased concern over valuation losses,

funding costs and the fiscal outlook. The yen traded around 159 to the dollar, stronger than its late-July lows near 164

but still weak enough to keep imported inflation pressure in focus. The currency has not recovered enough to remove

pressure on households or to eliminate expectations that the BOJ may need to raise rates again. A weak yen remains a

double-edged factor for Japanese equities. It supports exporters by increasing the yen value of overseas earnings, but

it raises the cost of imported energy, food, raw materials, chemicals and consumer goods. That makes the exchange rate a

direct issue for household purchasing power. Japanese authorities remain on watch for renewed currency weakness. The yen

has strengthened from its late-July lows after suspected coordinated intervention, but markets continue to test whether

the currency can stay below the 160 level without a clearer shift in BOJ policy. Bank of America Global Research

analysts said the BOJ may need to take the lead through rate increases as the primary tool for stabilizing the yen. They

argued that monetary tightening, together with credible fiscal management, would be more effective than relying mainly

on currency intervention. Japanese government bond yields remained elevated. The 10-year JGB yield was around 2.89% on

August 25, close to the three-decade highs reached earlier this month and not far from the psychologically important 3%

level. The level matters because a sustained move toward or above 3% would mark a major shift in Japan’s financial

environment after decades of ultra-low rates. Higher yields increase the government’s debt-servicing costs, affect

equity valuations and complicate fiscal planning. Reuters reported last week that the Finance Ministry is considering an

assumed interest rate of 3.8% for next fiscal year’s budget request, the highest in 29 years. That reflects the

growing pressure from higher long-term yields on Japan’s public finances. Prime Minister Sanae Takaichi’s

administration is pursuing more than 370 trillion yen in public and private investment through fiscal 2040, targeting

semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic

industries. The plan supports many of the companies investors favor, but it also raises questions about funding as

yields rise. The government is also weighing household relief measures, including food-related support. Such steps could

cushion consumers from higher prices, but investors remain concerned about revenue replacement and fiscal discipline if

relief is financed through additional borrowing. The Bank of Japan’s September 17-18 meeting is becoming the central

domestic policy event. Reuters has reported that BOJ officials are considering a rate increase as soon as that meeting,

with inflation risks building from yen weakness, high wholesale prices, Middle East tensions and strong global demand

linked to AI investment. The BOJ kept its policy rate at 1% at its July meeting, but board member Hajime Takata

dissented in favor of raising it to 1.25%. The central bank also warned that underlying inflation could exceed its 2%

target, strengthening expectations that another move may come before the end of the year. Japan’s July core consumer

inflation rose 1.8% from a year earlier, accelerating from 1.6% in June. An index excluding both fresh food and energy

rose 1.9%, showing that price pressure is moving beyond the most volatile categories. Wholesale inflation remains even

stronger. The producer price index rose 7.2% in July, suggesting that companies face continued pressure from raw

materials, imported goods, labor and logistics. If more of those costs are passed on to consumers, the BOJ may have

stronger justification for another rate increase. For households, the inflation picture remains uncomfortable. Wage

growth has improved, and recent real-wage figures have been encouraging, but consumers continue to face higher grocery,

gasoline, electricity, transport and service costs. TV Tokyo’s broader business themes remain central to the market

story. The key issue for consumers is whether wage gains are enough to cover daily expenses, while companies must decide

how much of their higher labor, energy, logistics and materials costs can be passed on without damaging demand.

Companies with pricing power, strong brands, recurring demand or exposure to structural investment remain favored by

investors. Smaller firms, retailers, logistics operators and import-dependent manufacturers remain vulnerable if the yen

weakens again or oil prices rebound. Oil prices were steadier after falling more than 2% in the previous session.

Reuters reported that the U.S. threat of stronger sanctions on Iran had limited immediate impact because the measures

lacked clear enforcement steps, although geopolitical risk remained in the background. For Japan, oil near the high-$80

to low-$90 range remains a risk because the country imports most of its energy. Higher crude prices feed into gasoline,

electricity, airlines, logistics, chemicals and manufacturing, and the impact is amplified when the yen is weak. The

global backdrop was cautious. Asian shares were rangebound as investors waited for Nvidia’s earnings and for signals

from Federal Reserve Chair Kevin Warsh at Jackson Hole. MSCI’s broadest index of Asia-Pacific shares outside Japan

slipped slightly, while Hong Kong and mainland China also weakened. Technology sentiment was fragile. Alibaba launched a

$10.2 billion discounted share sale to fund AI ambitions, while Samsung Electronics’ shareholder-return plan

disappointed some investors. Those developments added to caution across the regional AI and semiconductor complex.

Nvidia’s earnings are the most important event for Tokyo’s AI trade. Strong revenue, margins and data-center

guidance could revive buying in Japanese semiconductor, memory, component and data-center infrastructure shares. Any

disappointment could deepen selling in Kioxia, Advantest, SoftBank Group, Tokyo Electron, Fujikura, Furukawa Electric,

Ibiden and related names. U.S. Treasury yields were slightly lower after reports that the Treasury Department may use

its cash account to fund increased debt buybacks. That helped ease some pressure on global bond markets, but analysts

warned that the measure would not solve deeper concerns over debt, inflation and long-term borrowing costs. Those

concerns matter for Japan because global yield pressure has been one of the main reasons Tokyo’s AI shares have

struggled. Higher yields reduce the relative appeal of growth stocks and increase the discount rate applied to future

earnings, making highly valued technology shares more vulnerable. What to watch next: whether the Nikkei can hold above

64,500 after its August 25 decline, whether TOPIX continues to show relative strength, and whether selling in Kioxia,

Advantest and Panasonic spreads to other AI and semiconductor-related names. Investors will also monitor Nvidia’s

earnings and guidance. The result will likely set the tone for Japan’s AI trade, including chip equipment, memory,

optical fiber, electronic components and data-center infrastructure. The yen around 159 to the dollar remains a key

macro signal. A move beyond 160 would revive intervention speculation and strengthen expectations for a September BOJ

rate hike, while a stronger yen would ease household inflation pressure but weigh on exporters. The 10-year JGB yield

near 2.9% will also remain critical. A move toward 3% could renew pressure on equity valuations and increase concern

over the government’s fiscal position. Oil prices, U.S. sanctions pressure on Iran, Jackson Hole comments and South

Korean semiconductor shares will shape the next stage of trading. August 25 showed that Tokyo’s broader market still

has pockets of support, but the Nikkei remains exposed whenever investors reduce risk before major AI earnings. POPULAR

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Nvidia Caution Hits Chip Shares Tokyo stocks fell on August 25, with the Nikkei 225 closing at 64,980.53, down 0.8%, as

investors sold semiconductor and electronics shares ahead of Nvidia’s earnings while a weak yen, elevated bond yields

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