Japan's Nikkei 225 Stock Average fell 5.2% in October, closing the month at 63,290.11 on Oct. 30 after investors dumped artificial intelligence and semiconductor shares that had carried the index for most of the year. The benchmark had finished September at 66,753.72, according to Yahoo Finance data.

The monthly figure hides a sharper swing. The Nikkei rose to 70,683.98 on Oct. 6, its highest close of the month, then lost 12% in less than three weeks to bottom at 62,189.65 on Oct. 26. For investors in Hong Kong, Singapore and Seoul who hold Japanese chip names as a proxy for global AI spending, Tokyo has become one of the first places where doubts about that spending show up in prices.

Nikkei 225 Hit by Chip and AI Stocks

The worst day came on Oct. 15. The index dropped 3,318.34 points, or 4.9%, to 64,425.95, according to figures from Kyodo News carried by the Qatar News Agency. Kyodo called it the third-largest single-day point drop in the Nikkei's history and tied it to growing doubts about the profitability of AI and chip companies. The broader Topix fell a milder 2.4% that day, to 3,999.34, a gap that shows how concentrated the selling was in a handful of heavily weighted technology stocks.

The index then rose for three straight sessions late in the month before giving back 2.1% on Oct. 30, the last trading day, according to Trading Economics. The outlet tied that fall to weak results from large U.S. technology companies, including a softer outlook from Intel and a sharp rise in Amazon's capital spending, which revived doubts about the AI trade. Lasertec was among the session's biggest decliners.

The pattern is familiar. In July, the Nikkei slid into correction territory, more than 10% below its record close of 72,366.34 set on June 25, as memory chip stocks sold off, Reuters reported at the time. Kioxia led that decline too, falling 16.1% in one day, and its share price had already dropped by more than half since its market value briefly passed Toyota Motor's in June, Reuters said. The Nikkei ended October about 12.5% below that June record.

Kioxia Results Show the Growth Is Leveling Off

Kioxia, the flash memory maker, reported its first-half results after the market closed on Oct. 30. The numbers themselves were enormous. Revenue for the six months to Sept. 30 reached about 4.25 trillion yen, and operating profit reached about 3.26 trillion yen, according to the company's filing as reported by XenoSpectrum.

The quarterly trend is what traders focused on. Revenue in the July-September quarter was 2.48 trillion yen, up about 40% from April-June, as both selling prices and shipments beat the company's July outlook. For October-December, Kioxia guided to revenue of 2.5 trillion yen, up 0.8% from the second quarter, and operating profit of 1.995 trillion yen, roughly flat. The forecast assumes a stronger yen, at 157 per dollar against 161, which the company estimates will cut operating profit by about 55 billion yen. Kioxia expects data center and enterprise demand to offset weakness in smartphones and PCs and sees the NAND shortage lasting through 2027.

According to a Bloomberg report aggregated by Digg, the operating profit guidance fell short of the roughly 2.35 trillion yen analysts had expected, and Kioxia warned that flash memory price increases are slowing.

The company also declared an interim dividend of 90 yen a share on a pre-split basis, its first dividend since listing, payable from Dec. 8. Kioxia has said it may return all surplus funds to shareholders over the medium to long term, depending on its investment needs, XenoSpectrum reported.

Investors read the flat outlook as a sign that the memory price surge is plateauing. Kioxia shares fell as much as about 7% in after-hours proprietary trading on the evening of Oct. 30, according to reports cited by XenoSpectrum. The first full Tokyo session to price in the results opens Monday, Nov. 2.

The BOJ and What Comes Next

Policy offered little relief. The Bank of Japan held its policy rate at 1.25% on Oct. 30 in an 8-1 vote, and Trading Economics reported that a December increase remains possible. A higher rate would normally help bank earnings but could also lift the yen, which hurts exporters' yen-converted profits and, as Kioxia's own guidance shows, the overseas sales of chipmakers.

For now, the question for Tokyo is whether October's selloff was a reset after a steep run or the start of a longer reassessment of AI spending. Kioxia's guidance suggests prices are holding at very high levels rather than collapsing, but no longer climbing at the pace that drove the rally.