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

Tokyo witnessed a wavering Nikkei share average on Monday, as artificial intelligence-related stocks faced pressure ahead of Nvidia's upcoming earnings report. The market also felt the impact of inflation concerns and uncertainty in the Middle East, with expectations of a potential Bank of Japan interest rate hike in September. Japanese government bond yields saw a slight increase in early trading.

The Nikkei share average fluctuated between slight gains and losses, trading at 65,900.95 at 0156 GMT. After reaching gains of up to 0.4%, it dipped by 0.5% at one point. Many AI-related shares, which heavily influence the Nikkei, experienced declines, with Fujikura falling 3.5% and SoftBank Group losing 3.3%. However, chip-making tool manufacturers managed to outperform, with Tokyo Electron rising by 2.1%.

The broader Topix index saw a modest gain of 0.1%. Nvidia has informed several key customers that AI server prices will increase by more than 15%, due to the rising cost of memory. Financial results for the company are due to be announced on Wednesday. Wataru Akiyama, an equities strategist at Nomura Securities, views the concerns over the profitability of semiconductor-related companies, led by Nvidia, as a pretext or trigger for selling.

He stated that the outlook for earnings growth in AI and semiconductor-related stocks has not changed. Meanwhile, rising bond yields due to inflation worries suggest that the Japanese stock market may not sustain an upward trend at the moment.