The Nikkei 225 Index has suffered a sharp reversal this month, erasing some of its gains from earlier this year. It has dropped to 57,434, its lowest level since April 14, and is now 21% below its high for the year. This week could be highly volatile as some of its biggest constituents release their earnings.
SoftBank to publish earnings as AI jitters remain
SoftBank is the top Nikkei 225 stock to watch as it releases its financial results on Wednesday. The report comes after the stock fell to its lowest level since April 7, now 60% below its high for the year. It has also formed a death cross, with the 50-day moving average dropping below the 200-day moving average.
SoftBank has dropped because of the large investments it has made in the artificial intelligence industry, including in OpenAI. OpenAI recently raised $11 billion, much lower than the $30 billion it was aiming for. Its valuation also jumped to $1.25 trillion, well short of the $1.4 trillion it was targeting.
There is also a risk that OpenAI’s valuation will remain under pressure when it goes public next year. Anthropic, the maker of the popular Claude AI assistant, is expected to be valued at $1.5 trillion in its IPO, well below the $2 trillion it was reportedly aiming for.
SoftBank has also dropped as some of its investments have started falling. Arm Holdings stock dropped to $164 last week, down by 62% from its peak this year. SoftBank holds a big stake in Arm. Intel, which the company invested in last year, has dropped to $56, down by 60% from its peak.
Top Japan banks to publish earnings
The Nikkei 225 Index will also react to earnings by the biggest Japanese banks on Friday this week. These include companies like Mitsubishi UFJ, Mizuho Financial, and Sumitomo Mitsui Financial, which have a cumulative valuation of $470 billion.
The earnings come at a time when the stocks have lost momentum. Mitsubishi UFJ has dropped by 15%, while Mizuho and Sumitomo have fallen by 18.4% and 15%, respectively. These stocks have fallen as investors rotate away from banking stocks. The same has happened in Europe, where top banks like Lloyds, UniCredit, and Deutsche Bank have slumped.
Japan stocks have dropped sharply despite the ongoing Bank of Japan (BoJ) interest hikes. The bank has hiked rates to 1.25%, and analysts expect the bank to hike rates in the coming months.
The other top Japanese companies that will publish their earnings are Recruit Holdings, Rakuten, Honda, and Suzuki.
Nikkei 225 Index to react to AI news
The Nikkei 225 Index has slumped in the past few months, moving from a record high of 72,783 to the current 57,435. Most of the weakness is because of the ongoing AI jitters, which may continue this week.
Some of the top companies that will publish their earnings this week are neocloud companies like CoreWeave and Nebius. Also, companies like Cisco Systems and Applied Materials will publish their earnings.
While these are American companies, they may have an impact on global equities because of their role in the AI space. This is important because some of the biggest companies in the Nikkei 225 Index, like Kioxia and Advantest, are in this industry.
Nikkei 225 technical outlook
NI225 chart | Source: TradingView
The daily chart shows that the Nikkei 225 Index has slumped in the past few months, moving from a high of 72,783 in June to the current 57,434. It has already slumped below the important support level of 60,400, its lowest level on July 29.
The index has slumped below the 50-day Exponential Moving Average (EMA) and other trend indicators. At the same time, the Relative Strength Index (RSI) has continued falling. Therefore, the path of the least resistance for the index is lower, with the next key target being at 56,000.
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