Japan's Nikkei share average closed down 2% on Tuesday, as a sharp decline in shares of Samsung Electronics Co., Ltd. in South Korea triggered heavy selling in Japanese semiconductor-related stocks, which are heavily weighted on the index.

The Nikkei fell 2.12% to 68,256.96. The broader Topix index ended 0.97% lower at 4,062.26, having earlier hit a record high of 4,137.62 as investors bought into financials and other undervalued shares.

"The market is focusing on Samsung's share performance, which is falling despite the memory chipmaker's earnings forecast beating market expectations," said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

Shares in Japanese memory chipmaker Kioxia plunged 11.26%, while other semiconductor-related stocks such as Advantest and Tokyo Electron fell 2.25% and 3.94%, respectively.

The tech-heavy Nikkei often moves in tandem with South Korea's benchmark index, which is also heavily concentrated in chip stocks.

South Korea's benchmark KOSPI index fell as much as 8%, triggering its sixth trading halt of the year, with Samsung Electronics Co., Ltd. shares tumbling up to 10%.

The world's largest memory chipmaker forecast on Tuesday that its second-quarter operating profit would surge 18-fold from a year earlier.

"In the short term, investors will continue selling AI-related stocks to lock in profits, but at the same time, they are buying undervalued stocks," said Naoki Fujiwara, senior fund manager at Shinkin Asset Management.

Japanese banking stocks rose, with Mitsubishi UFJ gaining 2.26%. Shares of Mizuho Financial Group and Sumitomo Mitsui Financial Group inched up 0.39% and 0.18%, respectively.

Nomura Holdings climbed 3%, making it the top gainer among Nikkei components.

Toyota Motor closed 0.79% higher.

Of the 1,500-plus stocks traded on the Tokyo Stock Exchange's main board, 47% rose, 49% fell, and 2% were unchanged.