Nikkei falls 275 yen as semiconductor stocks meet election risk

By Sophie Lindqvist

The Nikkei Stock Average fell 275.12 yen, or 0.44%, to 61,913.51 at the Tokyo morning close on the 5th, while the TOPIX rose 1.54% to 3,955.29.

That split followed election-driven political expectations that concentrated selling in semiconductor and electronic-component stocks rather than producing a broad decline across the wider Tokyo market.

Investors cited the opposition Democratic Party’s strong showing in the U.S. midterm elections and feared stricter AI regulation.

They also worried that tighter rules for AI data centers could restrain related investment.

The report calls the session unusual because the benchmark index and individual stocks moved in opposite directions.

Why did TOPIX rise while the Nikkei fell?

TSE Prime Market trading value reached ¥5.708057 trillion, about $36.1 billion, during the morning session.

Advancers numbered 1,281, or 82% of Prime issues, while decliners numbered 261, or 16%.

Twenty-six of the 33 sectors advanced. Real estate, rubber products and transportation equipment led that group.

Seven sectors declined, including marine transportation and mining.

Toyota Motor, Sony Group and Fast Retailing rose, with Sony reaching a year-to-date high.

Fast Retailing’s heavy index weighting helped offset losses elsewhere in the Nikkei.

Advantest, Kioxia Holdings and SoftBank Group fell sharply.

High-priced stocks with large index weightings also dragged on the benchmark.

All three major U.S. indexes had risen the previous day, so Tokyo opened with buying before losses in AI and semiconductor stocks reversed the morning’s direction.

The current-session prices were morning closes, not completed-day results.

What changed after the previous session?

On the 4th, investors sold AI-related shares after reports that the Democratic Party had secured majorities in both chambers.

The Nikkei briefly lost more than 3,000 yen and approached 60,000 before bargain buying reduced the drop.

It closed at 62,188.63, down 893.23 yen, even as nearly 60% of all Prime Market stocks advanced.

That combination points to concentrated sector selling rather than indiscriminate liquidation.

The report offers no company-level decline percentages, trading volumes or fund-flow totals, so it cannot establish how much of the reaction came from forced institutional selling.

What does the political shift mean for AI investment?

Investors linked a stronger Democratic position in Congress to possible changes in AI rules and trade policy.

Their specific fear was that tighter regulation of AI data centers would curb investment in the infrastructure supporting those facilities.

Hirotaka Mori, head of the investment research department at Okachi Securities, expects political gains to create headwinds for AI-related shares.

He sees a softer hardline trade policy as a potential support for export-related stocks.

He said a credible U.S. policy shift could force institutional investors to reshuffle their portfolios.

His base case calls for limited downside because earnings results remain strong, although the report gives no earnings figures and he expects the Nikkei’s advance to slow if semiconductor stocks no longer provide the same lift.

Mori said: “today could mark a turning point in terms of stock selection.”

No enacted rule, regulatory timetable or data-center spending forecast appears in the report.

The market story therefore describes portfolio risk, not proven changes to semiconductor orders, pricing or capacity.

Is the rotation temporary?

An unnamed major brokerage said: “funds are shifting from AI-related stocks to other names.”

Easing political uncertainty and falling crude oil prices offered support for stocks outside AI, according to the report.

The brokerage remains unnamed, and the report gives neither the size of the fund shift nor the extent of crude’s decline.

Market participants remain divided over whether the rotation is temporary risk reduction or a medium- to long-term change.

Capital moving toward export-related and domestic-demand blue chips could broaden stock selection beyond AI and semiconductors.

Yet a rally in Japanese stocks driven by AI and semiconductors may lose momentum if its main drivers weaken.

For now, sector rotation depends on the shape of actual U.S. policy, and concrete rules will matter more than election headlines or speculative portfolio repositioning.

The next test is whether fund flows persist once policy details emerge, with sustained rotation likely to favor export and domestic-demand blue chips over AI and semiconductor momentum.