Japan's Nikkei falls more than 2% on AI spending worries

By Junko Fujita

TOKYO, July ‌24 (Reuters) - Japan's ​Nikkei ​share average fell more than 2% on Friday, as a sharp decline in Google parent Alphabet shares ‌spurred concerns about heavy AI spending.

The Nikkei was down ⁠2.69% at 64,634.04 as of 0112 GMT, while the broader Topix ‌slipped 1.28% to 4,002.09.

The Nikkei ‌has lost more than 7% so far this month, tumbling into correction territory last week. Its moves have been ​heavily affected by the tech-heavy South Korean benchmark KOSPI and the U.S. Philadelphia semiconductor index.

Shares of Alphabet sank 7% ⁠overnight after the company reported higher spending plans while it also burned cash. Wall ​Street indexes closed lower, with the Nasdaq shedding more than 2%.

Concerns resurfaced over whether heavy spending ​on AI infrastructure is sustainable after ‌Alphabet shares fell sharply overnight, said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

"The (Nikkei) index has been ⁠affected by overseas factors, not local cues. Many Japanese companies will start reporting their earnings from today, and if their outlook is ⁠strong, the index's trend may change," said Shimada.

Chip-related shares fell, with Advantest ​and Tokyo Electron losing 6.33% and 5.43%, respectively.

Technology investor SoftBank Group fell 7.42% and memory chip maker Kioxia lost 4.4%.

Shares supported by domestic ‌demand rose, with Central Japan Railway and East Japan Railway rising 1.17% and 0.6%, respectively.

Shippers rose, ‌with Kawasaki Kisen and Mitsui OSK Lines up 0.61% and ⁠0.88%, respectively.

Otsuka Holdings, a ‌maker of Pocari Sweat, ​rose 1.6% to become the top percentage gainer on the Nikkei.

(Reporting by Junko Fujita; Editing by Subhranshu ‌Sahu)

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