Japan’s Nikkei stock market plunged to its lowest point since September 2024 on Friday, February 28, 2025, as investors reacted to unsettling trends within the chip sector. The Nikkei share average dropped by 2.7%, landing at 37,237.49, following sharp declines from chip-related stocks, particularly Advantest, which saw its shares fall more than 8%. The broader Topix index also took a hit, falling 1.9% to 2,683.9.
Overnight, U.S. markets were similarly affected, with the S&P 500 and Nasdaq experiencing steep declines. A notable contributor to this decline was Nvidia, the renowned chipmaker, which reported disappointing quarterly results, leading to its stock plummeting by 8.5%. Nvidia's quarterly report failed to reignite Wall Street's enthusiasm for artificial intelligence investments, even as it initially hinted at favorable revenue growth. Instead, concerns grew after Nvidia's weaker-than-expected forecasts for gross margins overshadowed the good news.
According to Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory, investors had initially held some optimism about Japanese chip-related shares following Nvidia's earlier projections. "Investors had some hope on chip-related shares after seeing Nvidia’s outlook in the previous session, but they dumped those today after seeing the market reaction to Nvidia," he stated. This sentiment reflects how closely connected the Japanese market is to the U.S. tech sector and highlights the nervousness among traders.
Prior to Friday's downturn, the Nikkei had seen modest gains with reports showing it up by 0.3% on Thursday. The mixed reactions from Japanese chip stocks signified uncertainty, as they awaited Nvidia's performance to set the tone for trading. With such prominent players as Nvidia affecting market dynamics globally, it’s clear why Japanese investors are on edge.
Beyond just Nvidia, broader issues surrounding the U.S. economy have also been influencing market behavior. Recent economic indicators, highlighting cooling consumer spending, have made investors wary. This shift could imply tighter monetary conditions and perhaps more turbulence for markets already showing vulnerability to tech sector downturns.
The ramifications of such trends also extend to export-related Japanese companies, which typically rely on strong demand from the U.S. China trade tensions complicate the picture even more, after statements from former President Trump indicated looming tariffs on Chinese imports, effective March 4. Market analysts expressed concern over potential retaliatory measures and their impact on Japanese exporters.
This back-and-forth around tariffs adds yet another layer of complexity to the market's immediate outlook. With uncertainty looming at multiple fronts, including the chip sector's weaknesses and potential trade wars, investors are bracing for possible continued volatility across the market.
Looking forward, the outlook for the Nikkei and the Japanese chip sector could hinge upon reversing trends. Should Nvidia remedy its forecast or U.S. economic data take a more favorable turn, it might just alter the current bearish sentiment. For now, traders will remain vigilant, absorbing—with caution—the flow of both local and global economic updates.