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Japanese Video Game Stocks Are Crumbling. What’s Going On?

Derek Gibbs
February 5, 2026
6 min read
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Japanese video game stocks plummeted on February 4, 2026, with major companies like Nintendo, Capcom, and Konami seeing significant declines amid earnings reports and broader industry pressures.

Here’s the TL;DR:

  • Nintendo led the drop with a 12.3% plunge after its quarterly earnings revealed strong sales but raised concerns over future profit margins and hardware costs.

  • Other firms followed suit, including Capcom down 9.1%, Konami at 7.7%, and Sony at 4.2%, reflecting spillover from Nintendo’s results and AI-related market fears.

  • Key drivers include rising memory chip prices due to AI demand, a perceived lack of upcoming blockbuster games, and Google’s recent Project Genie AI reveal sparking disruption worries.

  • Investors remain cautious, but analysts note the sector’s resilience with upcoming releases like Mario Tennis Fever.

Why did Japanese video game stocks drop sharply on February 4, 2026?

Trading on the Tokyo Stock Exchange turned rough for gaming giants that day. Nintendo’s shares fell 12.3% by mid-afternoon, dragging down peers in a sector-wide slide. Capcom dropped 9.1%, Konami 7.7%, Koei Tecmo 6.3%, and Sony 4.2%, according to market analyst Dr. Serkan Toto.


The moves erased billions in market value, highlighting investor jitters over short-term hurdles.

The downturn wasn’t isolated. Square Enix and Bandai Namco each shed 3.4%, while Sega dipped 1.6%. Kadokawa, parent of FromSoftware, fell 3.9%.

This collective hit points to shared vulnerabilities in Japan’s gaming powerhouse lineup.

What triggered Nintendo’s 12.3% stock plunge?

Nintendo released its third-quarter fiscal 2026 earnings on February 3, showing net sales of 1,905.9 billion yen, a 99.3% jump year-over-year. Operating profit rose 21.3% to 300.4 billion yen, but profit attributable to owners dropped 41.9% to 358.9 billion yen.

Switch 2 hardware sold 17.37 million units, with software at 37.93 million.

Despite these gains, shares tanked. Investors focused on missed revenue estimates and shrinking margins, with the stock closing at 8,973 yen, down 10.98%.

President Shuntaro Furukawa addressed component cost pressures during the call, noting the company’s position to manage them for now.

Analysts like Morningstar’s Kazunori Ito flagged declining console profitability next year due to memory price surges.

A thin upcoming game slate added to the unease, though titles like Mario Tennis Fever in February and Pokémon Pokopia in March are on deck.

How is the memory chip shortage impacting gaming companies?

A global memory crunch, fueled by AI data center demand, has driven up prices for key console components like RAM and SSDs. Micron’s shift away from consumer sales to AI enterprises exacerbated the issue, potentially leading to higher console prices.

This hits hardware-heavy firms hard. Nintendo faces margin squeezes on the Switch 2, which sold over 7 million units this quarter but underperformed profit expectations.

Sony and others deal with similar supply chain strains, contributing to the day’s broad declines.

Longer term, the shortage could delay releases or inflate costs, but companies like Nintendo maintain full-year forecasts unchanged at 2,250 billion yen in net sales.

What role did Google’s Project Genie play in the stock drops?

Google unveiled Project Genie on January 30, 2026, an AI tool using the Genie 3 model to generate interactive virtual worlds from text prompts.

It creates 60-second explorable environments at 720p and 24 FPS, but lacks full game mechanics like plots or scores.

The reveal sparked fears of AI disrupting traditional game development, leading to U.S. stock sell-offs in firms like Unity (down 20%) and Take-Two (10%).

This ripple hit Asia, with Japanese stocks falling as investors worried about competition from AI-generated content.

Take-Two CEO Strauss Zelnick called it a “great sign of things to come,” seeing opportunities in faster creation.

Still, the hype fueled panic, though critics note Genie’s limits—no real gameplay yet.

I built marshmallow castles in Google's new AI-world generator | TechCrunch

Are there other factors hurting companies like Capcom and Konami?

Capcom’s drop ties partly to industry trends, but its own pipeline looks solid with no immediate red flags.

Konami cited U.S. tariffs and customer hesitation on new cabinets for a 5.7% revenue dip in gaming systems to 30.4 billion yen for the nine months to December 2025.

Broader tech sell-offs played in, with AI investment concerns rotating capital away from gaming.

Sony’s 4.2% fall reflects similar hardware cost worries, while Square Enix and Bandai Namco felt the Nintendo-led drag.

Could this lead to bigger changes in the Japanese gaming industry?

Mergers or acquisitions might surface if declines persist, with rumors of Xbox eyeing Nintendo—though unlikely given regulations.

FromSoftware’s parent Kadokawa dipped, but its Elden Ring success provides a buffer.

AI tools like Genie could speed prototyping, but human creativity remains key for hits like Mario Kart World, which sold 14.03 million units.

Tariffs add friction for global players like Konami.

The February 4 drops underscore Japanese gaming’s exposure to hardware costs and tech disruptions, yet strong fundamentals like Nintendo’s 17.37 million Switch 2 units sold suggest recovery potential.

Investors will watch upcoming releases and supply chain updates closely, as the sector navigates AI’s rise without losing its core appeal.

For now, the slump serves as a reminder that even giants face market whims—but history shows gaming bounces back with the next big title.

Hat Tips

Article compiled by Newsroom Staff on February 04, 2026 and was fact-checked by Editorial before publication.

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Derek Gibbs

I'm into video games, anime, tech, comics -- whatever else guarantees I never get to leave to the house. I handle operations at WebReef Media by day, and write about geek stuff at night. I was the original "Steven Bubbles," but now write under my own name. Graduation, baby!

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