Against a backdrop of uncertainty over the outlook for AI investment, Japanese stocks have remained volatile under the influence of AI-related names. Wider CDS spreads at U.S. hyperscalers have spilled over into the Nikkei 225, while the contribution of the top 10 constituents has driven market performance.
In the United States, CDS spreads for 4 hyperscalers, including NVIDIA, have widened sharply, creating uncertainty over the recovery of rising AI-related investment costs. This has had a significant impact on the Nikkei 225.
The top 10 Nikkei 225 constituents accounted for 46.67% of the index as of October, 8 of them being AI- or semiconductor-related stocks. Their contribution has been large relative to levels since 2011 and has played a decisive role in determining market movements.
In the broader market context, a shift toward inflation is supporting earnings growth at Japanese companies, while stock-market fundamentals are changing around interest rates and earnings. Stronger governance at listed companies is also being viewed as a structural change in the market.
A renewed broad-based credit risk in AI-related names, including the sharp declines in CoreWeave's stock and bond prices, is a short-term concern. Against this backdrop, stock selection in an inflationary environment is seen as important to the outlook for a long-term structural rise in Japanese equities.