Tokyo's Nikkei Slides as U.S. Midterm Results Hit AI Stocks

Japan's Nikkei 225 Stock Average fell more than 4% in early November to its lowest level since May, as jitters over the U.S. midterm elections rattled artificial intelligence stocks. CNBC reported the decline.

The election result is the immediate trigger. Democrats won control of both chambers of the U.S. Congress in the November 2026 midterms, and Bloomberg reported that Japanese stocks sank as the results hit technology shares.

Control of both chambers determines which legislation can reach a vote, and how quickly. In my view, that is why the reaction is less about any single bill than about the policy path for technology, trade and government spending. Traders are pricing a longer timeline of what Washington might do, not one headline.

The drop follows a sharp move in the same direction. On October 30, the index fell as much as 3%, led by chip-related stocks, on concerns about artificial intelligence, according to Reuters. Only days earlier, on October 5, the index had closed up 2.4% at 69,946.86 after briefly regaining the 70,000 level as AI optimism returned. The swings in recent weeks have been large, and they have concentrated in the same group of names that carried the rally.

The 2026 path has been volatile. The Nikkei first topped 60,000 on April 23 before ending 0.75% lower at 59,140.23. On May 6, the index advanced 5.6% to a record close of 62,833.84 on optimism about a U.S.-Iran deal, while oil prices steadied after losing nearly 8%. Japanese bonds rallied when markets reopened after holidays. The index closed at 64,999.41 on May 27 after touching a record peak, then at 66,020.04 on June 11, a 2.8% gain led by chip-gear suppliers including Tokyo Electron.

Momentum reversed in July. On July 17, the Nikkei slid into correction territory, a decline of 10% or more from a recent peak, amid a global rout in chipmakers and escalation in the Middle East conflict. The recovery that followed was uneven. On July 27 the index rose 0.4%, led by airline and auto stocks, as fears of further escalation in the Iran conflict eased. Two days later it rose 0.9%, led by chip and auto shares, in a rotation across Asian equities away from technology. On August 17 it rose 0.5% to 69,086.56, aided by weaker-than-expected preliminary second-quarter GDP growth estimates for Japan.

The broader context here is that the index's direction has been set largely by two forces: geopolitical headlines out of the Middle East and sentiment toward AI-linked chip stocks. The November decline adds a third, the U.S. political calendar.

A close at the lowest level since May leaves the index below every level reached since then, which means it has given back much of the advance it built in the spring and early summer.

For ordinary savers, the practical exposure runs through index funds, pension holdings and exchange-traded products tied to Tokyo. Those holdings register a decline of this size in reported values right away. In my view, the open question is whether the selloff reflects a repricing of U.S. policy risk or a continuation of the AI-driven swings that have defined much of the year. The coming sessions should narrow that down. If Tokyo's chip complex recovers in step with U.S. technology shares, that points one way. If it keeps diverging from them, that points the other.