Japan’s Nikkei stock index hit an all-time high Thursday, closing at 39,098.68. Semiconductor stocks helped propel the index even as Japan slips into recession. Photo by Kimimasa Mayama/EPA-EFE
The U.S. S&P 500 and Japan’s Nikkei stock index soared to record highs on Thursday, spurred by a surge in Nvidia stocks.
The S&P rose to 5,066 as of late Thursday morning and the Nikkei closed the day at 39,098, up 836.52 points, or 2.19%, marking all-time highs by both indexes. Advertisement
The S&P exceeded 5,000 for the first time Feb. 9 on the strength of five straight weeks of good U.S. economic news as inflation fears fell.
S&P stock earnings have performed better than expected, with 81% of the 332 S&P companies performing better than their original financial projections.
Japan’s Nikkei has seen an upswing this year, nearly 17% above 2023 levels.
In 1992, the Nikkei dropped under 20,000 points as Japan’s inflated bubble economy of the 1980s burst.
In February 2021, the Nikkei climbed above 30,000 points for the first time.
The soaring stock market in Japan is occurring even as the Japanese economy contracted for the second straight quarter, slipping into recession, according to GDP numbers released Feb. 15.
In the October to December 2023 period, Japan’s GDP declined by 0.4% on top of a 3.3% fall in the previous quarter, according to the Japanese government’s Cabinet Office. Advertisement
That fourth-quarter performance was a surprise, as economists had expected a 1.4% GDP expansion.
Japan’s economy in 2023 was $4.2 trillion, not far behind Germany’s GDP of $4.4 trillion.
Thursday’s surge was driven by semiconductor stocks, led by America’s Nvidia Corp.
Nvidia sales were up well above market expectations, with a 3.7-fold sales increase and $12.3 billion in net profits, an 8.7-fold increase.
“Nvidia was able to surpass the high expectations placed on it, with the results clearly demonstrating the growing need for artificial intelligence,” said Makoto Sengoku, senior equity market analyst at the Tokai Tokyo Research Institute.
Nvidia said in a Wednesday statement that its strong stock performance was powered by a 265% increase in revenue from a year ago as demand surged worldwide.
“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” said Jensen Huang, founder and CEO of NVIDIA, in a statement.
He said Nvidia RTX is now “a massive PC platform for generative AI, enjoyed by 100 million gamers and creators.”
He said new product cycles will help further propel Nvidia in the year ahead.
“The mega cap U.S. stocks, or the ‘Magnificent 7,’ they are frothy. They have very elevated earnings expectations and very elevated valuations that doesn’t give any room for disappointment,” MRB Partners Phillip Colmar said. He added semiconductor stocks like Nvidia are cyclical, so the market rally still carries risk. Advertisement
