Japan’s Nikkei Falls 3.56% to Lowest Since July 29

Japan’s benchmark Nikkei 225 plunged 3.56% on November 4, 2026, falling to 60,835.36 points by the midday break. It marked the index’s lowest level since July 29. The broader Topix index also declined 2.45% to 3,832.27 points as investors sold technology and artificial intelligence-related shares following developments in the US midterm elections.

The sell-off was driven largely by concerns that a Democratic takeover of Congress could increase regulatory scrutiny of AI infrastructure projects and slow investment in data centres. Japanese companies supplying semiconductor equipment, memory chips and fibre-optic components to the global AI industry were among the hardest hit. However, the Nikkei recovered some losses later in the session and ultimately closed approximately 1.4% lower, indicating that the initial market reaction eased as investors reassessed the election outcome.

Why Did Japan’s Nikkei Fall?

The main trigger was the US midterm election result, which pointed towards Democrats gaining control of both chambers of Congress.

Investors initially worried that a stronger Democratic presence in Washington could create obstacles for the expansion of AI infrastructure in the United States. Democratic lawmakers have raised concerns about the energy requirements, environmental impact and regulatory oversight of large data centres.

This matters to Japanese companies because several are important suppliers of the hardware required to build AI infrastructure.

Japan’s technology industry has benefited from global investment in artificial intelligence, particularly demand for advanced semiconductor manufacturing equipment, memory chips, testing systems and data-centre components.

If investment in US data centres slows, companies supplying this infrastructure could face weaker demand expectations.

Takamasa Ikeda, a senior portfolio manager at GCI Asset Management, said Democratic gains in key states had increased investor caution over the possibility of stricter regulation of AI infrastructure investment.

Japanese Technology Stocks Lead the Decline

Technology and semiconductor-related companies recorded some of the biggest losses during the morning session.

Company	Business	Intraday share-price movement
Advantest	Semiconductor testing equipment	-7.8%
Tokyo Electron	Semiconductor manufacturing equipment	-6.28%
SoftBank Group	Technology and AI investments	Around -9%
Kioxia	Memory chips and storage	-11.55%
Fujikura	Fibre-optic cables and infrastructure	-8.49%
Furukawa Electric	Fibre-optic cables and electronic materials	-9.66%

The declines show how closely Japanese technology companies are linked to expectations surrounding global AI spending.

Advantest supplies testing equipment used in semiconductor production, making it particularly sensitive to expectations for chip manufacturing demand.

Tokyo Electron provides equipment used in semiconductor fabrication. Its business is connected to investment plans by chip manufacturers around the world.

SoftBank Group has substantial exposure to the technology and artificial intelligence sectors through its investment portfolio. Its shares came under pressure as investors reassessed the outlook for AI-related businesses.

Kioxia, meanwhile, is a major producer of NAND flash memory used in data storage products, including enterprise storage systems that support data-centre infrastructure.

Fibre-Optic Companies Also Face Selling Pressure

The market decline extended beyond semiconductor manufacturers.

Fujikura and Furukawa Electric, two Japanese companies involved in fibre-optic cables and related infrastructure, also recorded significant losses.

Fibre-optic technology is essential for modern data centres because it enables high-speed communication between servers, storage systems and networking equipment.

As AI workloads become more demanding, data centres require increasingly sophisticated networking infrastructure to move large volumes of information between computing systems.

This has created opportunities for companies supplying optical cables and related components.

However, investors are now assessing whether the pace of AI infrastructure expansion can continue at its recent speed. Any slowdown in data-centre construction could affect demand expectations for suppliers across the technology ecosystem.

Why the US Midterm Elections Matter to Japanese Markets

The US election outcome has implications for global markets because American technology investment influences businesses across Asia.

The United States is one of the world’s largest markets for data-centre infrastructure, AI computing and advanced semiconductor products. Japanese companies supply several components and technologies required by these industries.

A Democratic-controlled Congress could push for stronger oversight of AI development, data-centre construction and energy consumption.

Investors also considered the possibility that political disagreements in Washington could create uncertainty around future economic and infrastructure spending.

However, the election result does not automatically mean that AI investment will decline. President Donald Trump remains in office and retains veto powers, while major legislative changes would require additional political and regulatory steps.

The initial sell-off therefore reflected investor concerns about possible policy changes rather than confirmation that US data-centre projects would be cancelled.

Nikkei Recovers Some Losses Later in the Session

Although the Nikkei recorded a sharp decline during the morning, the market recovered part of its losses as trading progressed.

Investors began reassessing the initial reaction after the election outcome became clearer and US equity futures improved.

According to market reporting, the Nikkei ultimately closed around 1.4% lower, compared with its 3.56% decline at the midday break.

Other Asian markets also showed different movements. South Korea’s Kospi recovered and finished higher, while Hong Kong’s Hang Seng and China’s Shanghai Composite advanced.

The recovery suggested that some investors were buying shares after the initial decline and reconsidering the immediate impact of the US political developments.

Nevertheless, the Nikkei’s substantial intraday fall highlighted the vulnerability of technology-heavy markets to changes in global AI investment expectations.

AI Investment Concerns Extend Beyond Japan

Japan was not the only market affected by concerns surrounding AI regulation and infrastructure spending.

Other Asian economies also have significant exposure to the global semiconductor and data-centre supply chains.

South Korea is home to major memory-chip manufacturers, while Taiwan plays an important role in advanced semiconductor production. Both economies are closely connected to global demand for AI computing hardware.

A slowdown in US data-centre investment could therefore affect companies across several Asian markets.

The concern also comes at a time when investors are increasingly questioning whether the enormous spending on AI infrastructure will generate sufficient returns.

Technology companies have committed substantial capital to data centres, advanced chips, networking equipment and electricity infrastructure. Investors are now paying closer attention to the relationship between these investments and future revenue growth.

The Bigger Picture

The Nikkei’s decline highlights the growing influence of artificial intelligence on global stock markets. Japanese companies that once attracted investors primarily through their manufacturing and export businesses are increasingly valued according to their exposure to the global AI supply chain. This makes their share prices sensitive to developments in US technology policy, data-centre spending and semiconductor demand.

The market reaction also demonstrates that political uncertainty can affect companies far beyond the country holding an election. Japan’s semiconductor and fibre-optic businesses depend on international customers, particularly companies investing heavily in AI infrastructure. Even the possibility of slower investment can trigger selling across the supply chain. However, the later recovery suggests investors were also considering the difference between political concerns and actual changes in corporate spending.

Looking Ahead

Investors will monitor developments in Washington for indications of how the new congressional balance could affect AI regulation, energy policy and data-centre construction. They will also watch upcoming earnings and guidance from Japanese semiconductor equipment manufacturers, memory-chip companies and infrastructure suppliers. Strong business performance could help offset concerns about political uncertainty, while weaker demand forecasts could increase pressure on technology shares.

For Japan’s stock market, the longer-term outlook will depend on global semiconductor demand, corporate earnings and the sustainability of AI infrastructure investment. The November 4 sell-off shows how quickly sentiment can change when investors reassess the assumptions supporting technology valuations. Whether the market stabilises will depend on actual business developments rather than election headlines alone.