AI losses pull Nikkei down even as 168 of 225 stocks gain, Topix up

With the shift away from AI still under way, the divide between the Nikkei and the Topix could remain a central theme, since a small number of chip stocks with heavy price weight can push the former down even when the broader market is higher. Cheaper crude directly improves Japan’s terms of trade, which helps importers and local-facing industries while hurting energy-linked shipping lines. Earnings due later in the day from Toyota, plus post-close reports from Sony and Nintendo, may show whether the advance has room to widen. If negotiations with Iran hit obstacles and oil rebounds, the key support for the market would disappear.

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Earlier:

• SoftBank takes two blows as Arm’s decline coincides with a US move away from AI, putting the Nikkei at risk

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Cheaper oil lifted most Japanese shares, but not the few big AI names that carry the Nikkei.

Summary:

• In early trading the Topix climbed roughly 1.3%, while the Nikkei was down 0.5%.
• Although 168 of the Nikkei’s 225 constituents advanced, losses among large tech names pulled the index into negative territory.
• Japan, which relies heavily on imports, got a boost from falling oil prices tied to expectations the Iran war could end.
• Advantest dropped around 10%, Tokyo Electron about 9%, and SoftBank Group roughly 5%.
• Real estate, retail and drugmakers outperformed; shipping turned in the weakest performance.

According to Reuters, Japanese equities were broadly higher on Thursday as cheaper crude buoyed much of the market, yet an intensifying slide in AI and semiconductor stocks pushed the Nikkei 225 into negative territory, with SoftBank Group one of the biggest weights.

The Topix added 1.3% early, having been up as much as 2.4%, while the Nikkei fell 0.5%. A clear divergence showed up: 168 of the Nikkei’s 225 components rose, but declines in a few very heavily weighted technology names were enough to dominate.

Oil was the catalyst for the advance. Crude prices sank after Democrats captured both houses of Congress in the US midterms, stoking optimism that the Iran war may come to a close. Lower energy costs are an unambiguous benefit for Japan, since the country brings in nearly all of its energy needs, most of it from the Middle East.

Stocks tied to artificial intelligence moved in the opposite direction, carrying over Wednesday’s fall as investors bet Democratic successes would make US data centre expansion slower. Chip-tool makers Advantest and Tokyo Electron lost about 10% and 9%, respectively, while SoftBank Group pulled back roughly 5%, hurt additionally by a drop in Arm after its earnings. A strategist noted funds that once went into AI and chips were rotating into other areas, although he did not think rivalry between the US and China would allow the data centre buildout to unwind.

Money rotated into local-facing and defensive industries. Property shares were the top performers, up around 6.5%, with retail and drugmakers next; Fast Retailing, the owner of Uniqlo, advanced about 8%. Toyota gained before reporting, while Sony and Nintendo were also higher heading into post-close releases. Shipping lagged on the possibility that freight prices would fall should the Middle East situation calm.

The day followed the script laid out in the earlier preview: Japanese equities were largely stronger, while the Nikkei was dragged down by its dependence on AI-related giants.