Japan’s Nikkei 225 plunged more than 4% on Monday as the AI stock rally cracked across Asia, erasing hundreds of billions of dollars in market value and dragging chip-heavy indexes into one o
Japan’s Nikkei 225 plunged more than 4% on Monday as the AI stock rally cracked across Asia, erasing hundreds of billions of dollars in market value and dragging chip-heavy indexes into one of their sharpest selloffs of the year.
The Nikkei 225 fell to 63,804.77, down 4.2%, after closing at a record 68,402.13 only days earlier. Nikkei’s own live index page later showed the benchmark near 64,093.56, down 3.75%, with the Nikkei Semiconductor Stock Index down more than 7%.
A widely circulated market estimate placed the Japan stock-market wipeout above ¥48 trillion, or roughly $335 billion. The precise figure depends on the market-cap snapshot used, but the scale of the move is clear: the same AI-linked stocks that carried Japan to record highs last week became the biggest source of pressure once investors started cutting risk.
The selloff hit Japan’s most important AI and semiconductor names first. Advantest, Tokyo Electron, Kioxia, SoftBank-linked AI exposure and other high-beta technology stocks came under pressure as traders unwound positions that had been built around Nvidia demand, HBM memory, advanced packaging and data-center expansion.
The reversal was sharp because the rally had been extremely concentrated. Japan’s record move above 68,000 had been driven by the same semiconductor and AI supply-chain names now taking the biggest damage. When that trade turned, the Nikkei’s price-weighted structure amplified the drop because high-priced chip and equipment stocks carry outsized index influence.
That is the same global AI trade that has been pulling capital across equities, private markets and crypto. Nvidia’s Korea push had kept attention on Samsung, SK Hynix and AI memory supply, but Monday’s action showed the other side of the trade: valuation sensitivity, crowded positioning and fast deleveraging when confidence breaks.
The pressure spread quickly into South Korea. The KOSPI plunged more than 8% after the open, triggering a 20-minute market-wide circuit breaker only minutes into trading. A sell-side sidecar was also activated on KOSDAQ.
Samsung Electronics and SK Hynix led the decline as traders sold the Korean memory giants that had become the center of Asia’s AI-chip boom. The move was especially violent because Samsung and SK Hynix account for a large share of KOSPI market weight, making the index highly exposed to a sudden semiconductor reset.
The Korean rout followed heavy U.S. tech selling, with Nasdaq weakness, Broadcom disappointment, stronger U.S. labor data and rate-hike fears all feeding into the same risk-off move. Taiwan, Hong Kong, China and India also traded lower as the chip selloff became a regional equity shock rather than a Japan-only event.
The equity drop was not only about semiconductors. Japanese bond yields added another pressure point, with the 10-year JGB yield rising toward 2.7% as markets continued to price tighter financial conditions and a more difficult Bank of Japan policy path.
Higher Japanese yields matter because they can weaken the logic behind yen-funded carry trades. When domestic Japanese yields rise and currency volatility increases, investors have less incentive to borrow yen cheaply and buy higher-risk assets elsewhere. That can turn a local bond-market move into a global liquidity event.
Geopolitics also worsened the setup. Oil jumped as Middle East tensions escalated, while U.S. rate fears increased after the latest labor data kept the Federal Reserve’s tightening risk alive. The combination left traders with little reason to defend crowded AI positions into the Asian open.
The same capital rotation is visible outside equities. Crypto has already been pressured by weaker liquidity, ETF outflows and a broader move toward AI mega-cap stories, with Bitcoin dropping in the global asset rankings as investors repriced risk.
A deeper equity shock can now cut both ways for crypto. If investors treat the Nikkei and KOSPI selloff as a temporary AI unwind, capital may eventually rotate back into higher-beta assets. If the move becomes a broader liquidity event, Bitcoin, Ethereum and altcoins may stay under pressure as traders reduce leverage across everything speculative.
The next test is whether the Nikkei can stabilize above the 63,000 to 64,000 zone and whether KOSPI chip leaders recover after the trading halt. If Samsung, SK Hynix, Advantest and Tokyo Electron keep falling, the selloff will look less like profit-taking and more like a full reset of Asia’s AI trade.
For now, Monday’s message is clear. Japan’s record-breaking AI rally has hit a wall, South Korea’s chip-heavy market has already triggered emergency trading brakes, and global investors are suddenly treating the AI trade as crowded, expensive and vulnerable to a sharper unwind.
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