Japan’s Nikkei 225 index faced mounting selling pressure during trading on Friday (November 6, 2026), driven by a sustained sell-off in technology stocks linked to artificial intelligence (AI). The benchmark Japanese index is now on a path toward a technical bear market, following a significant decline since the end of June. The Nikkei is at risk of falling 20% from its peak—a threshold commonly used to define a bear market. This development reflects growing investor concern regarding the outlook for the technology sector, following a prolonged rally previously fueled by optimism surrounding AI.
The pressure on the Nikkei stems primarily from a massive sell-off in technology and semiconductor stocks. Investors have begun trimming their holdings in companies tied to AI development, amid rising uncertainty regarding the sustainability of investments in the sector. This has led to a widening performance gap between the Nikkei—which has heavy exposure to tech stocks—and the broader Topix index, with the divergence reaching its widest level in decades. The situation suggests that market pressure is more concentrated within the technology sector than across the broader Japanese economy.
The weakness in the Japanese stock market has also been influenced by a decline in tech stocks on Wall Street, following U.S. midterm election results that have heightened expectations for stricter regulation of the AI industry. A victory for the Democratic Party has sparked concerns that Congress may push for tighter oversight of technology development—specifically regarding investments in data centers and the semiconductor industry. This sentiment accelerated a sell-off in US technology stocks, with the Nasdaq 100 index plunging 6.4% in a single trading session—its worst decline since March 2020. The downturn wiped out approximately US$2.3 trillion in market capitalization, while a key index of semiconductor stocks plummeted by as much as 12%.
The intensity of the selling pressure on AI-related stocks suggests that investors are beginning to re-evaluate the valuations of technology companies, which had previously surged. Concerns regarding regulatory shifts, the high costs of building AI infrastructure, and the potential for a slowdown in investment are driving this change in market sentiment. For Japan, these developments pose an additional risk, as many of its technology firms and semiconductor component suppliers are deeply integrated into the global AI supply chain. Should the pressure on US tech stocks persist, the Japanese stock market could face heightened volatility, particularly among companies reliant on demand for technology hardware and infrastructure.