After the Nikkei 225 plunged, financing for AI infrastructure investment became the focus. This article reviews the points Japanese equity investors should check this week following the CoreWeave shock and the upside surprise in US CPI.
After recovering the ¥70,000 level for the first time in 3 months on 6 October, the Nikkei 225 fell ¥3,318 intraday on 15 October to ¥64,426. It rebounded the following day, 16 October, but a sharp drop in CoreWeave shares in the US market and rising interest rates again spilled over into Japan, leaving the Nikkei 225 at a point where restructuring is required.
CoreWeave is a neocloud data-center operator, and its corporate bond yields surged above 15%. While revenue has doubled, debt has grown more than threefold, and the surge in bond yields and CDS prices has made credit risk a key market focus.
US headline CPI rose 3.7% and core CPI 2.6%, exceeding market expectations and reviving expectations of higher interest rates. PPI also posted strong growth, rising 1.3% month on month, adding to expectations of further inflationary pressure and increasing the probability of rate hikes.
There is a view that the decline in AI-related stocks is primarily a problem of interest rates and financing, rather than evidence of weakening demand for AI itself. Major earnings reports are concentrated this week, including Meta's, and the strength or weakness of financial soundness and financing is expected to influence the market.