AI Chip Stocks Sell Off Amid Rising Oil and Bond Yields, Triggering Japan Market Crash

Wall Street has continued to see subdued stock market performance recently, with high-growth sectors—particularly artificial intelligence (AI) and semiconductor chips—suffering a wave of sell-offs. While investor enthusiasm for AI-related stocks had driven up valuations in previous months, tech stocks previously supported by high valuations began to experience profit-taking as the US Federal Reserve signaled it would maintain a tight monetary policy, raising the cost of capital in the market. Japanese investors have likewise felt this volatility, with the Nikkei index plunging immediately after the opening bell today, led by heavy losses in technology shares.

The continuous rise in oil prices is another major driver behind this round of market volatility. Affected jointly by supply tensions stemming from the Russia-Ukraine conflict and an unexpected decline in US crude oil inventories, international crude oil prices broke through the $80-per-barrel mark over the past week. Rising energy costs not only directly impact the operating expenses of major oil-importing nations' enterprises, but also indirectly increase global inflationary pressures, forcing central banks worldwide to lean more heavily toward tightening interest rate policies. For energy-importing Japan, rising oil prices mean a potential expansion of the trade deficit, further eroding the relative competitiveness of the Japanese yen.

Rising synchronously with oil prices is a significant increase in global government bond yields. The yield on the 10-year US Treasury note has approached a high of 4.5% since the beginning of the year, while similar bonds in Europe and Japan have exhibited comparable trends. Rising yields mean falling bond prices, diminishing investors' willingness to shift capital from fixed-income markets to risk assets and subjecting stock market liquidity to dual pressures. Given Japan's massive government debt scale, the upward tick in sovereign bond yields will drive up future debt-servicing costs, posing a potential challenge to fiscal sustainability.

Against this backdrop, the performance of Japanese equities appears particularly vulnerable. Beyond tech stocks, traditional manufacturing and export-oriented companies have also faced the dual shocks of a depreciating yen and a slowdown in global demand. Investors generally anticipate that while the Bank of Japan maintains its accommodative policy, it will face pressure from rising external interest rates; if the yen continues to weaken, the rise in import costs will further erode corporate profits. Market sentiment has consequently turned conservative, with short-term capital largely opting to wait and watch or pivot toward more defensive financial and utility stocks.

Overall, the simultaneous climb in oil prices and bond yields has created a structural shock to global stock markets. High-valuation tech stocks such as AI and chips have lost support due to rising capital costs, dragging down the broader market. Meanwhile, volatility in the energy and bond markets has heightened investors' concerns regarding future economic growth and inflation trajectories. For Japan, if the external environment fails to ease, the market may remain volatile in the short term, and investors need to closely monitor the Federal Reserve's policy direction and oil price trends to adjust their asset allocations. (Fact Source: Central News Agency)