The sell-off followed weakness in U.S. technology stocks overnight, with investors locking in gains after months of strong market performance driven largely by enthusiasm surrounding AI-related companies.
SoftBank, one of the world's most aggressive investors in artificial intelligence, was among the hardest hit. The company's shares dropped as much as 10.6% to 7,434 yen, reversing part of a remarkable rally that has seen the stock surge roughly 70% since the beginning of the year.
The decline comes despite SoftBank's recent achievement of surpassing Toyota Motor Corporation as Japan's most valuable listed company, a milestone fueled largely by investor optimism surrounding AI and the company's growing exposure to the sector.
However, some investors remain cautious about the risks associated with SoftBank's strategy, particularly its willingness to make large and often speculative investments tied to emerging technologies.
At the center of that vision is SoftBank founder and CEO Masayoshi Son, who remains one of the strongest advocates for the transformative potential of artificial intelligence.
Speaking to CNBC earlier this week, Son argued that AI's long-term impact would dwarf previous technological revolutions.
"Now, if you look at the history, electronics and motorization crashed in 1929, but went up for many, many years, for the next 100 years after that … so there may be some correction, but that will be the best investment opportunity to me," Son said on Monday.
His comments suggest that while short-term market volatility may persist, he views any correction as a buying opportunity rather than a sign of weakening fundamentals.
Not all analysts share the same level of confidence in the near term. In a recent note to investors, Deutsche Bank analyst Peter Milliken suggested that markets may be struggling to properly assess the long-term implications of AI.
"The market appears to become fixated on short-term momentum, and less interested, or unable, to map out the long-term trajectory with detailed assumptions," Milliken wrote.
The weakness extended beyond Japan, affecting other major technology companies across Asia as investors moved to secure profits following significant gains.
In South Korea, memory chip giants Samsung Electronics and SK Hynix saw their shares fall by 1.25% and 2.75% respectively. The pullback came after both companies surpassed market valuations of $1 trillion in May, underscoring how quickly AI-related stocks have risen over the past year.
Meanwhile, SoftBank has continued reshaping its investment portfolio.
On Wednesday, the company sold a 3.25% stake in Indian eyewear retailer Lenskart through its affiliate SVF II Lightbulb (Cayman). The transaction involved approximately 56.5 million shares sold at 508.55 Indian rupees per share, valuing the deal at roughly 28.73 billion rupees, or more than $300 million.
Several prominent institutional investors participated in the purchase, including funds managed by ICICI Prudential Asset Management Company, Kotak Mahindra Group, and the Los Angeles City Employees' Retirement System.
While Thursday's decline reflects growing caution among investors after months of extraordinary gains, many market observers believe the broader AI investment story remains intact. The challenge for companies such as SoftBank will be convincing investors that the massive valuations being assigned to AI-related businesses can ultimately be supported by long-term earnings growth and commercial adoption.
For now, the market appears caught between two competing forces: excitement about AI's transformative potential and concerns that the sector's meteoric rise may have outpaced underlying fundamentals.