Nikkei tumbles as chip stocks extend global selloff

Japan's Nikkei 225 fell sharply on Tuesday, July 28, dragged lower by heavy selling in semiconductor stocks after Nvidia ↘ 1.47% declined 5% overnight on Wall Street and a report emerged that China has begun mass-producing domestic lithography equipment.tradingeconomics+2

The selloff in Tokyo followed a bruising session in the United States, where chip stocks weighed on the Nasdaq to start the week. The Philadelphia Semiconductor Index PHLX Semiconductor Index ↘ 1.19% fell more than 4% on Monday, extending a painful July for the sector that has seen the index decline sharply from its first-half highs.thenextweb+2

Nvidia and the Circular Financing Concern

The catalyst for Monday's U.S. decline was a Wall Street Journal report that Nvidia is in talks to provide roughly $250 billion in support for a data-center initiative by OpenAI, heightening investor concerns about circular financing within the AI sector. The report raised questions about the degree to which Nvidia is financially supporting its own customers to purchase its processors.wsj

Semiconductor equipment makers ASML ↘ 0.19%, Applied Materials ↗ 0.41%, Lam Research ↘ 1.18%, and KLA Corp ↘ 0.24% also fell after The Information reported that a Shanghai-based, state-backed company has begun mass-producing homegrown immersion deep ultraviolet lithography machines. The consortium, reportedly involving Shanghai Yuliangsheng, SiCarrier, and Huawei, is targeting delivery of five DUV systems in 2026 and 20 in 2027.kucoin+2

Concentrated Pain in Price-Weighted Index

In Tokyo, the damage was concentrated among the handful of high-priced chip names that carry outsized weight in the price-weighted Nikkei. Advantest and Tokyo Electron, two of the index's largest components by share price, have been at the center of repeated selloffs throughout July. Kioxia, the memory chipmaker, also came under pressure amid ongoing concerns about NAND oversupply and SanDisk's Western Digital Corporation ↗ 1.96% sharp declines earlier in the month.invezz+2

The broader Topix held up better, a pattern that has repeated throughout July's chip rout. On prior selloff days, the split between the two indexes showed that declines were concentrated in AI and semiconductor names rather than spread across the market. The Nikkei's price-weighted structure means a few high-priced stocks can move the index disproportionately, even when a substantial portion of listed companies post gains.newsonjapan

A Month of Semiconductor Turbulence

The July 28 decline adds to what has been an exceptionally volatile month for chip stocks globally. The PHLX Semiconductor Index had already fallen more than 18% for July through the prior week, after doubling during the first half of 2026. Analysts noted that earnings season, which ramps up from late July, will be critical for gauging whether the AI capital expenditure cycle remains intact.finance.biggo+1