Japan’s Nikkei Stock down Nearly 1％ as Tech Shares Stumble (UPDATE 1)

Reuters

12:21 JST, January 27, 2025 (updated at 16:45 JST)

TOKYO (Reuters) – Japan’s Nikkei share average shed nearly 1% on Monday as technology stocks slumped following last week’s rally, with investors sizing up the impact of a Chinese AI startup on U.S. tech dominance.

The Nikkei closed down 0.9% at 39,565.80 after initially rising in early trade, while the broader Topix finished up 0.3% at 2,758.07.

Heavyweight technology shares saw sizeable losses, backtracking from gains made last week on news of U.S. investment plans to fund infrastructure for artificial intelligence.

Market players are watching DeepSeek after the Chinese AI startup rolled out an open-source reasoning model called DeepSeek-R1 that it said rivaled OpenAI’s o1 on several performance benchmarks.

“There’s concern that the view of American cutting-edge technologies from companies like Nvidia and (OpenAI) as the most globally dominant might start to change a bit,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

Advantest, which counts U.S. chip darling Nvidia among its customers, declined 8.6% to become the biggest drag on the Nikkei. AI-focused startup investor SoftBank Group was down 8.3%.

U.S. stock futures also dipped during Japan trading hours after Wall Street’s main indexes closed lower on Friday dragged by the technology sector.

Japan’s stock market received some support after the Bank of Japan’s monetary policy concluded on Friday without a fuss, with the central bank raising interest rates as widely expected. Markets are still only expecting another 25 basis points of tightening this year.

Exporter shares including automaker giant Toyota Motor and peer Honda Motor gained as the yen hovered around the upper 155 range per dollar.

Of the Nikkei’s 225 constituents, 175 were up.

Among big-name shares, chip-making equipment giant Tokyo Electron stumbled 4.9% and electronics component maker Fujikura slid 10.7%. Uniqlo parent Fast Retailing added 0.6%.