With views spreading that the decline in AI-related Japanese stocks will continue next week, the Nikkei Average is expected to remain under pressure ahead of concerns over AI regulation following the US midterm elections and the release of US CPI and PPI data.
The Nikkei Average fell sharply on 6 November following a plunge in US AI and semiconductor stocks, closing at ¥57,434, down ¥3,643 from the previous day. The decline was the third-largest on record, and the index fell below ¥60,000 for the first time in about six months.
The backdrop was the Democratic Party’s recapture of majorities in both chambers of Congress in the US midterm elections, which fueled concerns that tighter regulation of AI data center construction could slow AI-related investment. These concerns are expected to remain the market’s focus next week. Concerns over tighter AI regulation are expected to weigh on share prices.
Following this week’s market action, the VIX rose about 70% to the 28 range, while the Nikkei Average VI also exceeded 40, reflecting heightened market caution. In the bond market, Japanese and US government bond yields fell, and the shift of funds from equities to bonds became more pronounced.
US October CPI and October PPI data are scheduled for release next week. If the inflation indicators exceed market expectations, upward pressure on interest rates could intensify and weigh on technology stocks. Conversely, confirmation of a slowdown in inflation could provide a catalyst for a rebound in the stock market.