Japan's Nikkei wavers as AI stocks weigh ahead of Nvidia earnings

Tokyo saw the Japan Nikkei share average fluctuate between slight gains and losses on Monday, with artificial intelligence-related stocks facing pressure prior to Nvidia's earnings report. Market sentiment was further dampened by growing concerns over inflation and political instability in the Middle East, as investors and analysts anticipate the Bank of Japan to raise interest rates at their upcoming meeting in September.

Japanese government bond yields increased in early trading. The Nikkei rose by 0.2% to 65,900.95 at 0156 GMT, having seen a range of gains of up to 0.4% and losses of 0.5%. Numerous AI-related shares, which typically dominate the Nikkei, fell, with Fujikura down 3.5% and SoftBank Group slipping 3.3%. Chip-making tool companies, however, posted gains, including Tokyo Electron, which increased by 2.1%.

The broader Topix managed a 0.1% uptick. In recent days, Nvidia has informed key customers that the cost of AI servers would increase by more than 15%, as reported by Bloomberg on Saturday. The company is set to release financial results on Wednesday. Wataru Akiyama, an equities strategist at Nomura Securities, views the worries about the profitability of semiconductor-related firms, led by Nvidia, as a mere excuse for selling.

He believes the outlook for earnings growth in AI and semiconductor-related stocks remains unchanged. However, with bond yields rising due to persistent inflation concerns, the Japanese stock market seems unable to sustain a rise, according to Akiyama.