It was a week in which the ability of AI investment to generate returns was tested in the US equity market. Japanese equities also fell, with the Nikkei Average down 4.03% and NASDAQ down 0.71%.
Last week, the Nikkei Average fell approximately ¥2,631, from ¥65,324.29 to ¥62,693.16, down 4.03%. TOPIX fell 2.46%, from 4,066.00 to 3,965.81, while the NASDAQ Composite fell 0.71%, from 26,140.03 to 25,955.34. Dollar-yen fell from ¥158.01 to ¥156.96, with the yen strengthening by approximately 0.66%.
The Nikkei Average's decline was heavily influenced by its constituent mix. The top four stocks by weighting are said to account for approximately 34% of the index, and movements in AI-related and semiconductor stocks were cited as factors affecting the index. In the US market, the ability of large-cap AI stocks to generate returns was a focus. Meta's third-quarter revenue rose 26% year on year to $64.601 billion, while capital expenditure was $34.91 billion and free cash flow was negative $2.12 billion.
Tesla's operating income contracted from $1.624 billion to $718 million while revenue was nearly flat. According to NYSE market commentary, the S&P 500 fell 1.2% in the one day following Meta's earnings announcement, while the equal-weighted index rose 0.7%, indicating a reversal in the movement of large-cap AI stocks.
This week includes the FOMC meeting and earnings announcements from Alphabet and Microsoft, among other events, so interest rates and foreign exchange movements also warrant attention. For stocks held, it is important to determine whether deteriorating margins and cash flow are attributable solely to the AI theme, and waiting for the results is also cited as an option.