Japan's Nikkei Falls Nearly 2,000 Points as Chip Stocks Drop

Japan's benchmark Nikkei average slid sharply on Monday, closing nearly 2,000 points lower and marking its fourth consecutive day of declines.

The sell-off was driven largely by weakness in semiconductor-related shares, particularly those tied to artificial intelligence technology, which have been among the market's biggest gainers in recent months.

Japanese chip stocks tracked losses on Wall Street, where US semiconductor shares also fell, highlighting how closely linked global tech markets have become. A pullback in American chip names often triggers a similar reaction in Tokyo, given investors' heavy exposure to the same supply chains and growth narratives.

Adding to the pressure were renewed concerns about geopolitical tensions in the Middle East, which have made investors more risk-averse. Uncertainty in the region tends to weigh on sentiment across equity markets, as traders shift toward safer assets when political risk appears to rise.

Combined, these factors contributed to a broad decline across the Tokyo Stock Exchange, with the index unable to find support despite recent momentum in technology-linked shares.

Market commentators are now turning their attention to what could become the next so-called 'momentum monster' — a term used to describe a stock or sector capable of generating outsized gains or losses as sentiment shifts rapidly.

Following a period in which AI and chip-related shares dominated trading momentum, questions are being raised about whether that leadership will continue or whether capital will rotate into other sectors.

Analysts note that the recent downturn does not necessarily signal a long-term trend reversal, but rather reflects short-term caution amid overlapping risks from both US tech markets and Middle East developments.

Investors will be watching closely in the coming sessions for signs of stabilisation, particularly in semiconductor shares, as well as any fresh developments overseas that could further influence sentiment in Tokyo trading.