Japan’s Nikkei share average fluctuated between modest gains and losses on Monday, as shares related to artificial intelligence faced pressure in anticipation of Nvidia’s earnings report later in the week. The market faced pressure from inflation concerns, compounded by ongoing uncertainty in the Middle East. Investors and analysts anticipate that the Bank of Japan will increase interest rates at its upcoming policy meeting in September. Japanese government bond yields experienced an uptick during the morning trading session.

The Nikkei was 0.2 per cent higher at 65,900.95 at 0156, after oscillating between gains of as much as 0.4 per cent and losses of 0.5 per cent. Most shares related to artificial intelligence, which are significantly represented in the Nikkei, experienced a downturn, with Fujikura decreasing by 3.5 percent and SoftBank Group falling by 3.3 percent. Chip-making tool manufacturers demonstrated strong performance, with Tokyo Electron experiencing a 2.1 percent increase. The broader Topix inched up 0.1 percent. Nvidia has informed several of its major clients that prices for AI servers will increase by over 15 percent due to escalating memory costs, as reported on Saturday. The company is set to disclose its financial results on Wednesday.

“We view the concerns over the profitability of semiconductor-related companies — led by Nvidia — as little more than a pretext or trigger for selling” following “a significant build-up of open positions in margin trading recently”, said Wataru Akiyama. “I think it is fair to say that the outlook for earnings growth in AI and semiconductor-related stocks has not changed.” At the same time, with bond yields rising as a result of building inflation worries, “it does not appear that the Japanese stock market is currently in a position to sustain an upward trend”, he added.