Nikkei 225 falls hard: did Alphabet reveal AI boom's most expensive flaw?

Japan’s Nikkei 225 fell sharply after Alphabet’s blowout AI-related spending reignited concerns that the AI boom is still producing cash burn rather than strong free-cash-flow returns. Alphabet’s shares dropped about 7% after reporting $44.9 billion in quarterly capex, negative free cash flow of $5.9 billion, and a raised 2026 capex outlook of $195 billion-$205 billion. The sell-off hit Japan’s most AI-exposed names, including Advantest, Tokyo Electron, Kioxia and SoftBank Group, while the Nikkei fell 2.69% versus a smaller 1.28% decline in Topix. The move reflects how overseas tech signals are weighing on Japan’s price-weighted index, which is more sensitive to high-priced technology stocks. Defensive domestic names such as railways and shippers outperformed, indicating rotation into lower-beta, Japan-focused businesses. Overall, the article points to a risk-off sentiment in Japanese equities tied to doubts over the monetization timeline of AI infrastructure spending.