Nikkei 225 plunges 2.8% as semiconductor rout deepens across Asia

Asian stocks tumbled on Friday as a deepening semiconductor selloff erased confidence in the region's tech-heavy markets.

Japan's Nikkei 225 slid 2.8% on Friday as a global retreat from semiconductor shares accelerated, dragging down Asian tech-heavy markets.

"All told, it's still a strong market when you look at earnings across all caps," said Patrick Ryan, chief investment strategist at Madison Investments.

The MSCI gauge of Asia-Pacific shares outside Japan edged 0.1% lower. The selloff tracked weakness on Wall Street, where the S&P 500 lost 0.51% to 7,533.77 and the Nasdaq Composite declined 1.47% to 25,881.95. The VanEck Semiconductor ETF slid almost 4%, with Arm Holdings dropping more than 5% and US-listed shares of SK Hynix tumbling more than 13%.

The rout leaves Asia's chip-heavy markets exposed to further selling as Taiwan Semiconductor Manufacturing Co. failed to reassure investors. The company posted a better-than-expected second-quarter report but raised its capital expenditure forecast to between $60 billion and $64 billion for the year, up from a prior range of $52 billion to $56 billion — a signal that spooked investors already wary of oversupply. TSMC shares lost more than 2%.

Wall Street weakness spills into Asia

The selloff extended beyond semiconductors. Alphabet dropped more than 4% after reports that the company delayed releasing its most powerful artificial intelligence model, Gemini 3.5 Pro. Other Magnificent Seven names — Meta Platforms, Nvidia and Amazon — also traded lower. Micron Technology and Advanced Micro Devices each fell more than 5%, while Broadcom lost 5%.

In Asia, Japan's export-oriented Nikkei bore the brunt of the selloff given its heavy weighting in semiconductor equipment makers and chip-related stocks. South Korea's Kospi also faced pressure from the SK Hynix decline, with the US-listed shares of the memory chipmaker sliding more than 13%.

Earnings season provides a counterweight

Despite the equity rout, the broader earnings picture remained constructive. Of the 40 S&P 500 companies that had reported through Thursday, more than 87% topped Wall Street estimates. Major banks crushed second-quarter earnings expectations earlier in the week, and US economic data continued to show resilience — jobless claims came in at 208,000, below the 218,000 consensus, while retail sales met expectations with a 0.2% gain.

Crude oil prices edged higher, adding to investor caution as renewed Gulf hostilities pushed oil toward a weekly gain. Indian government bonds rose for a second straight session, with the benchmark 6.94% 2036 bond yield falling 3 basis points to 6.7436%, tracking overnight gains in US Treasuries after softer data eased concerns about an imminent Federal Reserve rate hike.

The next catalyst for markets will be the flow of earnings reports in the coming week, with investors watching for signs that the semiconductor weakness is spreading to other technology sectors. For now, the Nikkei's 2.8% drop and the broader Asian rout suggest the risk-off tone could persist as traders reassess AI-related valuations.

This article is for informational purposes only and does not constitute investment advice.