Nikkei Rally Stalls on Market Jitters before Nvidia Earnings

Reuters

16:10 JST, February 21, 2024

TOKYO, Feb 21 (Reuters) – Japan’s benchmark stock index finished lower for a second day on Wednesday, teetering below an all-time high as traders waited to see if the financial results of U.S. chipmaker Nvidia justify the AI euphoria that has gripped global share markets recently.

The Nikkei share average regained some of its morning losses but still closed down 0.26% at 38262.16, with 124 of its 225 constituents declining.

Over the past week or so, the benchmark gauge has been edging closer to the lifetime record of 38,957.44 set on the final trading day of 1989 at the peak of Japan’s bubble economy.

On Friday, the benchmark index pushed as high as 38,865.06 before pulling back into the close. It is currently just under 700 points shy of the record high.

The broader Topix finished the day down 0.19% at 2627.3.

The Nikkei’s momentum towards the 35-year record has been stalled by Wall Street, which closed lower overnight after returning from a holiday on Monday, as investors worried whether Nvidia’s quarterly results will justify its expensive valuation.

The broader Philadelphia semiconductor index declined over 1% as Nvidia and other chip stocks stumbled.

Nikkei’s tech-related shares sagged, with chip-testing equipment maker Advantest, which counts Nvidia among its customers, down about 2%. Chip-making equipment giant Tokyo Electron fell 0.38%, and Lasertec Corp, another company involved in producing chip-related equipment, lost 1.89%.

SoftBank Group, which invests in an AI-focused startup, was down roughly 2%.

Japan’s chip giants, which share ties with high tech companies in the U.S., have had a “significant impact” on the Nikkei, said Sumitomo Mitsui DS Asset Management’s Chief Market Strategist Masahiro Ichikawa, putting plenty of weight on Nvidia’s revenue report.

If the tech company’s results disappoint, Ichikawa sees potential for the Nikkei to fall below 38,000 points, while a surprise to the upside could be enough to push the index to all-time highs.