Japan's Nikkei stock average closed down more than 2% on Friday, as a significant drop in Google parent Alphabet's share price rekindled concerns about the sustainability of massive spending on artificial intelligence.

The Nikkei index fell 2.73% to close at 64,611.15 points, but still managed a weekly gain of 0.7% following a 6.4% decline in the prior week. The broader Topix index slipped 1.05% to 4,011.31 points.

The Nikkei has dropped nearly 8% so far this month and entered correction territory last week. Its movements are heavily influenced by the tech-heavy South Korean KOSPI benchmark and the Philadelphia Semiconductor Index in the United States.

Alphabet shares tumbled 7% overnight after the company announced higher spending plans while also burning through cash. Major Wall Street indexes closed lower, with the Nasdaq falling more than 2%.

Kazuaki Shimada, Chief Strategist at IwaiCosmo Securities, stated that after Alphabet's sharp overnight decline, market concerns over the sustainability of huge spending on AI infrastructure have resurfaced.

"The (Nikkei) index is being driven by external factors, not local ones. Many Japanese companies will start reporting earnings from today, and if their outlooks are strong, the index's trajectory could change," Shimada added.

Chip-related stocks fell, with Advantest and Tokyo Electron dropping 6.02% and 4.99%, respectively.

Technology investment firm SoftBank Group fell 7.06%, while memory chip maker Kioxia dropped 9.49%.

Stocks supported by domestic demand rose, with East Japan Railway and West Japan Railway each gaining nearly 2%. Central Japan Railway, which operates the Tokyo-Osaka bullet train line, rose 1.62%.

Otsuka Holdings shares rose 2.2%, making it the top gainer on the Nikkei index.

Among the more than 1,500 stocks traded on the Tokyo Stock Exchange's prime market, 40% advanced, 56% declined, and 3% were unchanged.