Japan's Nikkei drops 1.8% as AI and chip stocks plunge, despite broad market gains

Japan's Nikkei share average fell 1.8% on Thursday, driven by a sharp selloff in AI and chip stocks, despite most index components rising. The decline followed a Democratic sweep in US midterm elections, raising bets on slower AI data centre expansion. Chip equipment makers Advantest and Tokyo Electron plunged 14.7% and 9.4%, respectively, while investors rotated into other sectors. Real estate rose 7.2%, retail gained 5.1%, and Toyota Motor surged 16.7% after raising its profit forecast. The broader Topix index gained 1.2%. Lower crude oil prices, linked to expectations of an earlier end to the Middle East conflict, buoyed the broad market. Shipping fell 6.9% on prospects for reduced freight rates, while analysts noted US-China strategic competition may limit any reversal in data-centre construction trends.