Japan's Nikkei falls to 2-month low on chip selloff

Adds comments in paragraph 3, updates with stock prices

By Junko Fujita

TOKYO, July 28 (Reuters) - Japan's Nikkei share average fell more than 4% on Tuesday to its lowest in two months, as chip-related stocks followed their U.S. peers lower amid caution ahead of big tech earnings.

The Nikkei .N225 declined 4.34% to 62,112.91 by 0223 GMT, while the broader Topix .TOPX was down 2.76% at 3,953.88.

"The Nikkei fell because AI-related stocks were heavily sold off, but this has nothing to do with the fundamentals of Japan's economic outlook," said Koji Toda, senior fund manager at Resona Asset Management.

"Once investors see a firm outlook of big technology firms in Japan and the United States later this week, they would buy back stocks."

Overnight, Nvidia NVDA.O fell 4.9% and the Philadelphia semiconductor index .SOX extended its recent selloff, falling 2.2%. The index is down 21% from its record-high close on June 22, but up 63% in 2026.

South Korea's benchmark KOSPI .KS11 plunged 9% on Tuesday.

The Nikkei's ⁠moves have been heavily influenced by the tech-heavy KOSPI and the U.S. Philadelphia semiconductor index.

Memory chip maker Kioxia 285A.T tanked 18%. Chip-related Advantest 6857.T and Tokyo Electron 8035.T dropped 10% each.

The Nikkei has declined more than 14% since hitting a record high in mid-June as concerns over global technology firms' aggressive AI spending weighed on local chip-related shares.

Investors had been shifting money to value stocks, such as banks, which had been rising on prospects of an early Bank of Japan interest rate hike.

On Tuesday, bank shares fell, with Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T losing more than 3% each.

Beaten-down software-related and computer shares rose, with Shift 3697.T and Fujitsu 6702.T climbing nearly 4% each. Nomura Research 4307.T was up 2.5%.

Of the more than 1,500 stocks trading on the Tokyo Stock Exchange's prime market, 28% rose, 70% fell and 1% traded flat.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu)

((junko.fujita@thomsonreuters.com;))