Japanese stocks extended their rebound on Tuesday, with the Nikkei 225 rising 0.80% by midday, as investors steadied themselves ahead of Nvidia's earnings next week. The broader Topix index gained 0.79%, marking a third straight session of gains after last week's pullback in AI-related shares.
The mood improved even as investors digested a mixed bag of news from the AI boom. Cloud AI firm CoreWeave said it expects to turn profitable on an adjusted basis in the first half of 2028, while The Wall Street Journal reported that OpenAI's quarterly revenue climbed about 50% to $10 billion, despite ongoing losses. SoftBank, one of Japan's biggest AI backers, reminded markets that scaling this technology is expensive, with its shares down after posting a 1.1 trillion yen quarterly loss.
SoftBank's loss: a reality check for AI spending
SoftBank's hefty quarterly loss underscores the heavy costs of building and operating AI infrastructure. The conglomerate has been a major investor in AI-related ventures, and its results often serve as a barometer for the sector's financial health. While revenue growth at companies like OpenAI shows strong demand, the persistent losses highlight the gap between investment and profitability.
For everyday investors, this is a familiar tension: the promise of future growth versus the reality of current spending. SoftBank's shares dipping after the loss suggests that even big backers are not immune to market scrutiny when the numbers disappoint.
Nvidia earnings: the key test for AI sentiment
All eyes are now on Nvidia, the US chip designer whose products power many AI data centers. Nomura, one of Japan's largest banks, cited Nvidia's upcoming third-quarter report as the key test for whether worries about AI and semiconductor earnings start to fade.
If Nvidia's numbers suggest demand and pricing are still holding up, analysts often adjust their forecasts across the supply chain, and investor appetite for paying up for growth can return quickly. If not, the same linkages can amplify caution.
Nvidia tends to act as the bellwether for AI hardware, so its earnings can move more than just its own stock. When it changes expectations for AI data-center spending, that can flow straight into analysts' forward profit forecasts for related companies, and into the price-to-earnings multiples investors are willing to pay.
What it means for investors
Japan's AI- and semiconductor-linked names can trade like a single "global AI" basket around the Nvidia print, sometimes overshadowing local headlines. Moves in stocks such as Kokusai Electric and Taiyo Yuden, which were up roughly 7.5% by midday, can end up being driven as much by Nvidia's read-through as by SoftBank's loss.
For investors, this means that the fate of Japanese tech stocks is increasingly tied to a handful of US companies. While that can create volatility, it also offers a way to play the AI theme without buying US shares directly. However, it also means that any disappointment from Nvidia could quickly ripple through Tokyo's market.
Beyond Nvidia, investors will be watching for any further signals on AI demand and spending. The recent tech stock wobble shows how sensitive the sector is to news flow. And with inflation concerns still lingering, the broader market backdrop remains uncertain.
For now, the rally suggests that investors are willing to give AI companies the benefit of the doubt, but the real test comes next week. As always, it's wise to remember that markets can turn quickly, and that past performance is no guarantee of future results.
