The Nikkei Average is expected to move next week against the backdrop of earnings from U.S. technology companies, the employment report and the midterm elections. Concerns about the profitability of AI-related investment will be the focus, with earnings from AMD and Apple attracting market attention.
The Nikkei Average ended trading on 30 October at ¥63,290, down ¥1,369 from the previous day. Following earnings announcements from major U.S. technology companies, volatility increased in AI-related stocks, and selling spread to Japanese semiconductor-related stocks, causing the Nikkei to fall sharply.
Next week's key events will include earnings from Apple and AMD, the U.S. employment report and the U.S. midterm elections. Profitability concerns over the massive capital investment in AI are expected to come under renewed scrutiny, and the performance of AI-related stocks could determine the direction of the market.
In a review of this week's trading, Microsoft's Azure revenue exceeded market expectations and its return to positive FCF supported the share price. In contrast, Alphabet's revenue and EPS fell short of expectations and its net income declined, while Amazon's share price fell amid a deterioration in its outlook. The relationship between the profitability of AI investment and cash flow trends became clear as a factor influencing the valuation of individual stocks.
Next week's market sensitivity to risk could change depending on U.S. earnings, including AMD's results, the U.S. employment report and the outcome of the midterm elections. In Japan, a recovery in buying of AI-related stocks is also possible, but concerns over the profitability of investment funds will remain a theme.