Japan's Nikkei drops 2% as tech shares track US peers lower

By Kevin Buckland

TOKYO, Nov 7 (Reuters) - Japan's Nikkei share average fell on Friday, heading for its biggest weekly drop since early April, as heavyweight tech stocks tracked an overnight decline in U.S. peers on stretched valuation concerns.

The tech-heavy Nikkei .N225 slid as much as 2%, and was last down 1.8% at 49,955.08, slipping below the psychologically key 50,000 mark.

Startup investor SoftBank Group 9984.T dropped 8.4% and chip-testing equipment maker Advantest 6857.T, a Nvidia NVDA.O supplier, slumped 7%, making them the Nikkei's top two decliners in index-point terms.

The broader Topix .TOPX lost 0.8% to 3,286.16.

Overnight, investors returned to selling the darlings of the artificial intelligence-fuelled rally that carried Wall Street, Tokyo and other global bourses to successive record peaks in recent months. Nvidia slid 3.7% and AMD AMD.O dropped 7.3%.

The Nikkei was headed for its worst week since the April tariff shock as the share gauge pulled back from a record peak touched on Tuesday. It was last down 4.7% for the holiday-shortened week.

In October, the benchmark index rallied 16.6% to record its best month in 35 years.

"Rather than a change in the way investors fundamentally view AI stocks, there is this risk-off mood around how fast these stocks have rallied," said Nomura Securities strategist Fumika Shimizu.

Corporate results are also key for the market now, with Japan's earnings season currently in full swing, she said.

The three biggest percentage decliners on the Nikkei on Friday all posted disappointing financial results. Environmental equipment supplier Kanadevia 7004.T tumbled 20% and confectionary maker Ajinomoto 2802.T and electronic component manufacturer Taiyo Yuden 6976.T each shed more than 16%.

The biggest percentage gainer was also driven by corporate results, with HR technology firm Recruit Holdings 6098.T jumping 15%.

Embattled automaker Nissan Motor 7201.T got some respite after reporting a return to operating profit. Its shares climbed 5.3%.