Japan's Nikkei falls more than 2% on AI spending worries

Japan's Nikkei share average fell more than 2 percent on Friday, as a sharp decline in Google parent Alphabet shares spurred concerns about heavy AI ‌spending.

The Nikkei was down 2.69 percent  at 64,634.04 as of 0112 GMT, while the broader Topix  slipped 1.28 percent  to 4,002.09.

The Nikkei has lost more than 7 percent  so far this month, tumbling into correction territory last week. Its moves have been heavily affected by the tech-heavy South Korean benchmark KOSPI and the US Philadelphia semiconductor index.

Shares of Alphabet sank 7percent  overnight after the company reported higher spending plans while it also burned cash. Wall Street indexes closed lower, with the Nasdaq shedding more than 2 percent .

Concerns resurfaced over whether heavy spending on AI infrastructure is sustainable after Alphabet shares fell sharply overnight, said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

"The (Nikkei) ‌index has been affected by overseas factors, not local cues. Many Japanese companies will start reporting their earnings from today, and if their outlook is strong, the index's trend may change," said Shimada.

Chip-related shares fell, with ⁠Advantest and Tokyo Electron  losing 6.33percent  and 5.43percent, respectively.

Technology investor SoftBank Group fell 7.42 percent  and memory chip maker Kioxia lost 4.4 percent .

Shares supported by domestic demand rose, with Central Japan Railway and East Japan Railway rising 1.17 percent  and 0.6 percent, respectively.

Shippers rose, with Kawasaki Kisen  and Mitsui OSK Lines up 0.61 percent and 0.88 percent, respectively.

Otsuka Holdings, a maker of Pocari Sweat, rose 1.6 percent  to become the top percentage gainer on the Nikkei.