Japan’s Tokyo stock market closed the week with the Nikkei Stock Average up 3,107.09 yen (+4.7%) from the previous Friday at 68,713.80. Weaker-than-expected U.S. employment data eased concerns about early rate hikes, and buying remained dominant throughout the week, led by AI and semiconductor-related names. However, with the April-June earnings season now largely complete, individual stock catalysts will become extremely scarce from next week onward. With Nvidia’s earnings release and the Jackson Hole symposium on the horizon, sharp market swings are possible depending on sentiment toward AI-related stocks.

AI and Semiconductor Stocks Lead Gains, but Profit-Taking Emerges Late in the Week

The buying momentum from the start of the week stemmed from the July U.S. employment report released the previous Friday, which showed nonfarm payrolls declining for the first time in five months. This led the market to broadly expect the Federal Reserve to hold off on rate hikes at the September FOMC meeting. Buoyed by gains in U.S. equities, risk appetite strengthened in the Tokyo market, particularly in artificial intelligence (AI) and semiconductor-related sectors.

On August 12, following a Japanese holiday, the market extended gains, tracking strength in U.S. semiconductor stocks. The TOPIX hit its highest level in a month. Rising South Korean stocks also provided a tailwind. On August 13, slower growth in the U.S. Consumer Price Index (CPI) boosted U.S. tech stocks, leading to a gap-up opening in Tokyo. However, gains were somewhat capped after reports emerged that the Japanese government supports an early Bank of Japan rate hike from the perspective of maintaining the effectiveness of coordinated U.S.-Japan currency intervention.

On Friday, August 14, the market rose for a fourth consecutive session, briefly surging by about 1,300 yen. The U.S. Producer Price Index (PPI) came in below market expectations, easing inflation concerns. With memory-related stocks rising in the U.S. market, buying was concentrated in tech stocks in the morning session, but weekend positioning gradually shifted toward profit-taking in AI and semiconductor names, and the market closed off its highs.

U.S. Semiconductor Stocks Show Signs of Overextended Expectations; Wait-and-See Mood Likely Next Week

In U.S. trading on Friday, Applied Materials (AMAT), a major semiconductor equipment maker, fell 5.1%. Although the company’s fourth-quarter (August-October) revenue guidance released on August 13 exceeded market expectations, it fell short of investors’ elevated hopes. The stock had doubled since the start of 2026 amid robust demand related to AI data center buildouts. As concerns about stretched valuations in AI-related stocks spread, selling spilled over to other semiconductor names, with Broadcom (AVGO) falling 5.9% and Intel (INTC) dropping 2%.

In the Tokyo market, AI and semiconductor-related stocks also struggled to extend gains late in the week. The Philadelphia Semiconductor Index (SOX) similarly showed signs of fatigue on August 13 and remained top-heavy into the weekend. The fact that even Applied Materials, which reported strong earnings, faced selling pressure suggests that the market has already priced in considerable optimism for semiconductor stocks.

Next week’s U.S. market calendar features Nvidia’s earnings release and the Jackson Hole symposium, which will likely foster a wait-and-see mood. Depending on Nvidia’s results, Tokyo’s AI and semiconductor sectors could see either concentrated buying or a broad-based selloff.

With Earnings Season Winding Down, Thematic Rotation May Shift Focus to Non-AI Names

With the April-June earnings season wrapping up this week, individual stock catalysts will be extremely scarce from next week onward. As thematic trading gains momentum, the price action in AI and semiconductor names is likely to dictate the overall market direction. However, even if AI-related stocks soften, rotation into non-AI names—which tend to move inversely—should prevent market sentiment from deteriorating significantly.

Next week’s U.S. earnings calendar features a heavy slate of consumer-related names, including Home Depot, Target, and Walmart. If buying interest in these stocks strengthens, attention in the Tokyo market may shift toward non-AI sectors such as retail.

Additionally, investors should watch for bargain-hunting opportunities in stocks that have already experienced “sell-the-news” reactions following earnings releases, as well as those that have fallen sharply on deteriorating fundamentals.

GDP, Currency Markets, and BOJ Rate Hike Expectations in Focus

Domestically, Japan’s April-June Gross Domestic Product (GDP) will be released on August 17. The market appears to be expecting quarter-on-quarter growth of approximately 0.5%, or an annualized rate of around 2.2%. Personal consumption and capital expenditure figures will also draw attention. If the data comes in solid, it would reinforce the view that the negative impact from the worsening Middle East situation remains limited—a potential tailwind for non-AI stock rotation.

Dollar-yen movements also remain in focus. This week, reports indicated that “the Japanese government supports an early Bank of Japan rate hike from the perspective of maintaining the effectiveness of coordinated U.S.-Japan intervention.” According to multiple sources, the BOJ is reportedly considering a rate hike to 1.25% as early as the September 17-18 monetary policy meeting, strengthening rate hike expectations. A September hike would mark the first increase in three months since the June 15-16 policy meeting.

Given that Japan has received U.S. support for its currency intervention, the likelihood of an early rate hike appears high. Furthermore, with the possibility of at least another round of yen-buying intervention, upside for the dollar-yen pair appears limited. Against this backdrop, slowing U.S. inflation expectations could exert further downward pressure on the dollar-yen exchange rate. The market is watching the 160-yen-per-dollar level as a potential trigger for renewed intervention. Along with bank stocks, there is likely to be increased reassessment of yen-depreciation beneficiary stocks.

Regarding the Middle East situation, the deadline for final negotiations on a U.S.-Iran ceasefire agreement approaches on August 17, and investors should remain alert to potential risk events.

Key Economic Indicators Next Week

Domestically, Japan will release April-June GDP and the June Tertiary Industry Activity Index on August 17, June Machinery Orders and July foreign visitor arrivals on August 19, July Trade Statistics and July new condominium sales in the Tokyo metropolitan area on August 20, and July Consumer Price Index and August S&P Global Manufacturing PMI on August 21.

Overseas, China will release July retail sales and industrial production on August 17, along with U.S. June Treasury International Capital flows and the August New York Fed Manufacturing Index. Germany’s August ZEW Economic Sentiment Index and U.S. July existing home sales and industrial production follow on August 18. The minutes from the July 28-29 FOMC meeting will be released on August 19. The August Philadelphia Fed Manufacturing Index and initial jobless claims come on August 20, followed by August S&P Global Manufacturing and Services PMI data for both the Eurozone and the United States on August 21.

The probability of a rate hike at the September FOMC meeting, as implied by U.S. interest rate futures, stands at 29%, down from 34% at the end of the previous day. The market is pricing in a 69% probability of a rate hike by December.

Next week’s Tokyo market is expected to struggle for direction amid a catalyst vacuum following the earnings season, with two major events—Nvidia’s earnings and the Jackson Hole symposium—looming ahead. While the market will likely be swayed by the relative strength of AI-related stocks, the key question is whether rotation into non-AI names can provide underlying support.