Japanese equities experienced a significant decline on Friday, as a sell-off on Wall Street sparked doubts about the longevity of the artificial intelligence investment trend.

The Nikkei 225 Index, heavily weighted with chip stocks, fell 4.1% to close at 64,113.32, while the broader Topix index dropped 2.2% to 3,939.14.

Technology shares led the market lower, with Tokyo Electron Ltd plunging 9% and leading the declines on the Topix. Within the index's 1,637 components, 723 stocks advanced, 870 declined, and 44 remained unchanged.

The Nikkei 225 has retreated 10% from its peak in June, moving into correction territory.

Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, noted that despite strong earnings reports from semiconductor-related companies, the market continued to sell these stocks. This suggests that the robust results had already been priced in by investors, leading to a 'sell the news' reaction.