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JAPAN’S STOCK MARKET CRASH EXPLAINED: The Nikkei is now down over -14% from its June record, after falling another -4% today.| Two forces are driving the selloff: 1. $AI fatigue and a valuation reset The Nikkei had surged 37% in 2026, largely powered by $AI and semiconductor companies. Chip-related stocks grew to roughly 25% of the entire index, meaning Japan became heavily dependent on a small group of winners. Now, investors are questioning whether record $AI spending can generate enough profit to justify those valuations. That reversal is hitting the former market leaders hardest: $SOFTBANK : −7% Advantest: −6% $KIOXIA : −9.5% Tokyo Electron: −5% 2. China is becoming more self-sufficient in chips China has reportedly started producing its own DUV chipmaking machines. That matters because companies such as $ASML and Japanese chip-equipment makers rely heavily on selling these machines to China. $ASML fell 8.5% as investors priced in the risk that China may need fewer foreign suppliers over time.